Estimated tax questions
#1
BE Forum Addict
Thread Starter
Joined: Feb 2010
Location: Temecula, CA
Posts: 4,759
Estimated tax questions
On the positive side, it's virtually June and I've nearly earned more than the entire year last year! On the negative side, my estimated quarterly tax payments are obviously going to be insufficient . How do I correct it mid-year instead of receiving a big bill next April (like I just had this April)?
I'm set up for automatic withdrawals this year. Do they happen pretty much at the deadline dates, ish? For example, if the next due date is June 15th or whatever, will they attempt payment +/- a couple of business days within that date?
For the purchase of this house, my mum lent me an amount for the deposit (we had the money but it was an easier paper trail to come as a "gift"). Do I declare the loan somewhere and then later deduct the payments made, or can I ignore the income that I earned and simply redirected back to her for repayment? I'm not trying to do anything underhand here: just wondering what I should do.
FWIW I previously used a well known (to BE) tax expert and also used TurboTax in parallel, have decided to go for the latter next year as the amounts were virtually identical, but don't recall Q/A for the above scenarios.
Thanks.
I'm set up for automatic withdrawals this year. Do they happen pretty much at the deadline dates, ish? For example, if the next due date is June 15th or whatever, will they attempt payment +/- a couple of business days within that date?
For the purchase of this house, my mum lent me an amount for the deposit (we had the money but it was an easier paper trail to come as a "gift"). Do I declare the loan somewhere and then later deduct the payments made, or can I ignore the income that I earned and simply redirected back to her for repayment? I'm not trying to do anything underhand here: just wondering what I should do.
FWIW I previously used a well known (to BE) tax expert and also used TurboTax in parallel, have decided to go for the latter next year as the amounts were virtually identical, but don't recall Q/A for the above scenarios.
Thanks.
#2
Re: Estimated tax questions
On the positive side, it's virtually June and I've nearly earned more than the entire year last year! On the negative side, my estimated quarterly tax payments are obviously going to be insufficient . How do I correct it mid-year instead of receiving a big bill next April (like I just had this April)?
Don't forget State taxes (California?) and you may want to do some planning for both this year and next to see if you are likely to be impacted by Alternative Minimum Tax.
For the purchase of this house, my mum lent me an amount for the deposit (we had the money but it was an easier paper trail to come as a "gift"). Do I declare the loan somewhere and then later deduct the payments made, or can I ignore the income that I earned and simply redirected back to her for repayment? I'm not trying to do anything underhand here: just wondering what I should do.
Last edited by JAJ; Jun 1st 2014 at 7:19 pm.
#3
Re: Estimated tax questions
If you are using the electronic payment system to make your quarterly payments, you can log in and increase your future payments. I did that last year when I realized my income was higher than I expected it to be.
#4
BE Forum Addict
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,128
Re: Estimated tax questions
And the money comes out of your bank account pretty well on the day it is scheduled. There is no warning e-mail ahead of time so be sure you have sufficient funds in the bank for each date of payment.
#5
BE Forum Addict
Thread Starter
Joined: Feb 2010
Location: Temecula, CA
Posts: 4,759
Re: Estimated tax questions
Thanks.
#6
Lost in BE Cyberspace
Joined: Jan 2006
Location: San Francisco
Posts: 12,865
Re: Estimated tax questions
For the purchase of this house, my mum lent me an amount for the deposit (we had the money but it was an easier paper trail to come as a "gift"). Do I declare the loan somewhere and then later deduct the payments made, or can I ignore the income that I earned and simply redirected back to her for repayment? I'm not trying to do anything underhand here: just wondering what I should do.
#7
Re: Estimated tax questions
From memory you may need to cancel the future payments you have set and then do new ones. I can't remember if it was the Feds where I couldn't just change the amount or Oregon State.
#8
BE Forum Addict
Thread Starter
Joined: Feb 2010
Location: Temecula, CA
Posts: 4,759
Re: Estimated tax questions
A loan doesn't have to be declared, neither does a gift under $100k from a foreign person. Either way, the principal of a loan or gift is not income and hence not taxable to you. If you earned interest on the loan, then you'll get a 1099 from the financial institution that paid you the interest at year end and you'll need to pay tax on that. If your mother is charging you interest, you might be out of luck deducting it on your return unless you can finagle it as a business expense of some sort. Payments of loan principal back to your mother to pay off the loan aren't deductible.
Ok, I'll have a look, thanks. I'm not so bothered about the CA one - the federal one is much larger! The wife was so disappointed when we didn't get a refund this year and irrationally told me to sack the accountant . Year 1 was me working for 8 months; year 2 was me working for 12 months and her 9, so of course we owed tax come April year 3!
#9
Re: Estimated tax questions
So you pay the tax four times a year...right?
Do you simply pay enough on each tax day based on the previous quarter leading up to that day?
Do you simply pay enough on each tax day based on the previous quarter leading up to that day?
#10
BE Forum Addict
Thread Starter
Joined: Feb 2010
Location: Temecula, CA
Posts: 4,759
Re: Estimated tax questions
* Except California where you make three uneven quarterly payments, the third being zero due...
#11
Heading for Poppyland
Joined: Jul 2007
Location: North Norfolk and northern New York State
Posts: 14,526
Re: Estimated tax questions
Instead of estimated payments, you can, if you prefer, try to fine tune by raising or lowering your withholding at work or from investment income etc.
The only dangers are giving the government an interest free loan (big deal) or being subject to a penalty for not paying enough through the course of the year.
#12
Re: Estimated tax questions
I was sent quarterly payment vouchers a couple of times, but never used them, I just scheduled extra withholding from my salary, and only usually during the fourth quarter. I must emphasise that only "catching up" with my taxes late in the year has NEVER had any negative consequences, or indeed any consequences at all as far as I can tell.
#13
Lost in BE Cyberspace
Joined: Jan 2006
Location: San Francisco
Posts: 12,865
Re: Estimated tax questions
So far as I can tell, it doesn't make any difference when during the year the tax is paid, so long as it's paid by 31/12. I sometimes schedule some extra withholding from my salary in November and December if my income has risen and/or my accountant recommends it.
I was sent quarterly payment vouchers a couple of times, but never used them, I just scheduled extra withholding from my salary, and only usually during the fourth quarter. I must emphasise that only "catching up" with my taxes late in the year has NEVER had any negative consequences, or indeed any consequences at all as far as I can tell.
I was sent quarterly payment vouchers a couple of times, but never used them, I just scheduled extra withholding from my salary, and only usually during the fourth quarter. I must emphasise that only "catching up" with my taxes late in the year has NEVER had any negative consequences, or indeed any consequences at all as far as I can tell.
#14
Re: Estimated tax questions
So far as I can tell, it doesn't make any difference when during the year the tax is paid, so long as it's paid by 31/12. I sometimes schedule some extra withholding from my salary in November and December if my income has risen and/or my accountant recommends it.
I was sent quarterly payment vouchers a couple of times, but never used them, I just scheduled extra withholding from my salary, and only usually during the fourth quarter. I must emphasise that only "catching up" with my taxes late in the year has NEVER had any negative consequences, or indeed any consequences at all as far as I can tell.
I was sent quarterly payment vouchers a couple of times, but never used them, I just scheduled extra withholding from my salary, and only usually during the fourth quarter. I must emphasise that only "catching up" with my taxes late in the year has NEVER had any negative consequences, or indeed any consequences at all as far as I can tell.
Either that, or the IRS just don't bother checking.
#15
BE Forum Addict
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,128
Re: Estimated tax questions
I'm not sure that's the case. I think you're supposed to to make sure that your tax is up to date by each quarterly payment deadline. These are usually about the 15th of the month after quarter end. However, there is a potential explanation: your salary-or pension-based withholding is spread evenly through the year, but your tax owed is weighted towards the end of the year, as your total income moves up through the tax brackets. This means that providing it's small compared to your salary, extra income early in the year doesn't necessarily mean you have underpaid for the quarter, providing you pay the estimated tax due by the deadline for the fourth quarter. Hopefully I've explained that clearly enough.
I have tax withheld every month from my pension, and I make quarterly payments but each year I am selling securities and/or doing ROTH conversions so I make extra on-line payments in the quarters where I have these extra, sizable, chunks of taxable income. I got it wrong 2 years ago and had to pay about $60 in penalties for underpayment.