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I started working as a freelance writer in August, leaving my normal, tax-friendly job behind, figuring I would just have to settle up at the end of the year, but now I read about this quarterly tax stuff. What's my best course of action right now? I presume I'm not completely hosed by this? I also get the feeling that the answer is "find a pro," which I am down for as well, but I figured I should at least ask if there's something I should do immediately, besides that.
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Nov 9, 2012 21:39
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bairfanx posted:I started working as a freelance writer in August, leaving my normal, tax-friendly job behind, figuring I would just have to settle up at the end of the year, but now I read about this quarterly tax stuff. What's my best course of action right now? I presume I'm not completely hosed by this?
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Nov 9, 2012 22:30
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JimTheSarcastic posted:If this is your first year with self-employment income, you won't incur any penalties if you don't pay your taxes until tax day. However, starting next year, you are obligated to pay your quarterlies. I do recommend having a CPA in your Rolodex. They are worth their weight in... if not gold, then at least copper. Not only will they find you write-offs that you hadn't considered, they will save you invaluable amounts of heartache and stress should you get ever get audited (god forbid). To me, a self-employed person, it's worth the relatively minor cost to have my taxes done right. Yeah, that was definitely the plan, I just didn't think I had to worry about it until at least, well, nearing the end of the year like now. Thanks for the help!
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Nov 10, 2012 00:04
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sapmagic fucked around with this message at 20:05 on Feb 9, 2022 |
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Nov 12, 2012 15:36
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sapmagic posted:I'm interested in contributing to a backdoor Roth IRA this year (as described here). I have $5k in an existing traditional IRA and just wanted to make sure I had the steps/paperwork right. 1) There probably won't be a 1099-R, trustee-to-trustee transfers don't typically show up anywhere. 2) Not sure I would re-use the same account, I'd hesitate to have the IRS computers to get confused and send you notices that you would need to respond to. 3) That is correct. Assuming that you are doing this since your AGI is too high for a roth IRA contribution. They've removed the AGI limit on conversions - even though it's taxable, with the Obamacare tax increases kicking in for 2013, maybe you should consider a conversion and paying tax on some of your retirement income today?
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Nov 12, 2012 18:02
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I think he would need to do the rollover before 12/31, since the basis recapture calcs use your IRA balances as of 12/31/12.
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Nov 12, 2012 20:25
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furushotakeru posted:I think he would need to do the rollover before 12/31, since the basis recapture calcs use your IRA balances as of 12/31/12. Forgot the other part of his post regarding timing. Sorry about that. Should make sure your company 401(k) plan will accept incoming IRA funds, some do not.
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Nov 12, 2012 21:27
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JimTheSarcastic posted:If this is your first year with self-employment income, you won't incur any penalties if you don't pay your taxes until tax day. However, starting next year, you are obligated to pay your quarterlies. I do recommend having a CPA in your Rolodex. They are worth their weight in... if not gold, then at least copper. Not only will they find you write-offs that you hadn't considered, they will save you invaluable amounts of heartache and stress should you get ever get audited (god forbid). To me, a self-employed person, it's worth the relatively minor cost to have my taxes done right. CPA here - you might not "need" a CPA. Furu is an LTC and he seems to be just fine. Interview around - I know CPAs in my town that are flat-out idiots, and I know unlicensed professionals who can crank out returns like nobody's business.
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Nov 12, 2012 21:29
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AbbiTheDog posted:CPA here - you might not "need" a CPA. Furu is an LTC and he seems to be just fine. Actually, I'm an Enrolled Agent. It means I passed a difficult 4 part test administered by the IRS that is on taxation, unlike the CPA exam which is almost exclusively on public accounting (since a CPA is, after all, a Certified Public Accountant)and is overseen by the local accountancy board. Yes, I took the test back when it was 4 parts given once a year and not three parts taken one at a time whenever the hell you feel like it. Kids these days have it sooooo easy 
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Nov 12, 2012 22:14
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AbbiTheDog posted:CPA here - you might not "need" a CPA. Furu is an LTC and he seems to be just fine.
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Nov 12, 2012 22:39
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furushotakeru posted:Actually, I'm an Enrolled Agent. It means I passed a difficult 4 part test administered by the IRS that is on taxation, unlike the CPA exam which is almost exclusively on public accounting (since a CPA is, after all, a Certified Public Accountant)and is overseen by the local accountancy board. I sat for the CPA exam in 98 when it was twice a year, all four parts at once. It was near the end when they were moving to the 5 year degree rule, so you had all the people who were trying to get grandfathered in on their 4 year degree taking the test. They held it at one of the fairgrounds building, and it was something like 600 people testing at once. Weird.
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Nov 12, 2012 23:40
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AbbiTheDog posted:Furu is an LTC and he seems to be just fine. 
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Nov 13, 2012 01:12
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Whoops, nevermind.
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Nov 13, 2012 08:31
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I live permanently outside the US and have income from:
My question is: A lot of the e-filing services I've looked at have their own "user-friendly" interfaces for the forms. I have trouble getting these to play ball. What are some e-filing methods which have a pretty similar layout, field for field, as the actual IRS forms?
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Nov 15, 2012 00:00
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sapmagic posted:I'm interested in contributing to a backdoor Roth IRA this year (as described here). I have $5k in an existing traditional IRA and just wanted to make sure I had the steps/paperwork right. I'm working the same maneuver. From what I've found, you can do the 401k rollver and the Roth two-step in the same year. However, to be safe, I'm planning on doing the rollover this year, then getting the new copy of Turbotax and running the scenario prior to putting anything into the traditional IRA. You've got til April 15 to make a 2012 contribution / recharacterization.
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Nov 20, 2012 02:53
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Kinda new to this so bare with me, My co-worker made me realize that I was paying too much in taxes through-out the year when he revealed that he listed the maximum number of allowances, which he stated at the time was eight or so. I would like to do the same thing and avoid paying taxes at the end of the year by putting money into an IRA (not Roth). I'd prefer to try and estimate how much I should contribute to the IRA at the beginning of each year. Hypothetically, if I were to make an error and it turned out that I owed money to the IRS come tax time would I be able to make an IRA contribution matching what I owe to avoid the under-payment penalty fee or would I be subject to the fee simply because I didn't calculate everything perfectly prior to Jan 1?
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Nov 21, 2012 05:47
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What I do is set enough allowances that I've overpaid by a couple grand by the end of the year. Then I put the couple grand refund into my IRA (or whatever), supplemented by the other money I've been saving for the same purpose. Very easy. I suppose you could use a traditional IRA contribution for what you're describing, because it would (slightly) reduce your tax - but basically you're barking up the wrong tree with that. Don't underpay your taxes during the year.
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Nov 21, 2012 05:55
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slap me silly posted:What I do is set enough allowances that I've overpaid by a couple grand by the end of the year. Then I put the couple grand refund into my IRA (or whatever), supplemented by the other money I've been saving for the same purpose. Very easy. Yeah the mistake was pointed out to me in the newbie thread, I should have said $1k taxable income instead of $1k taxes owed. Anyways, my problem with getting a return is that it's money that I could have invested in a 401k/IRA through-out the year.
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Nov 21, 2012 06:11
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Calculate how much less money you'll have at retirement if you invest it at the end of the year instead, and see if you still give a poo poo.
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Nov 21, 2012 06:34
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I've been looking ahead at my taxes for 2012 and I'm a little confused about deductions for my HSA contributions, and the maximum amount I can contribute without paying a penalty. Setup: Normal max is $3100 for 2012. Became enrolled in an eligible plan on January 4, 2012, so I'm pretty sure my max is now 11/12th of that, $2841. Contributions: My employer put in $1000. I put in $1000 (50 weeks at $20/week) as pre-tax payroll deductions. I put in $840 from my checking account. My questions: 1) Does my employers contribution count against my yearly limit, am I at it or can I put another $1000 in? 2) On form 1040 line 25, by way of form 8889, I get $1840 as my deduction. The problem is that it looks like part of that $1840 has already been deducted by way of payroll reduction and lowered my wages on my W-2.
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Nov 21, 2012 20:56
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Xenoborg posted:I've been looking ahead at my taxes for 2012 and I'm a little confused about deductions for my HSA contributions, and the maximum amount I can contribute without paying a penalty. The annual limit is from all sources. You do not deduct amounts already contributed by your employer or via pre-tax deductions from your payroll. On the 8889 form it gives you instructions to omit these amounts from the amount to be deducted. There are separate lines to account for these other contributions.
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Nov 21, 2012 22:05
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furushotakeru posted:On the 8889 form it gives you instructions to omit these amounts from the amount to be deducted. There are separate lines to account for these other contributions. I'm not seeing this on either the form or the instructions. Line 2 is where you put your contribution in and lines 3-11 are computing your maximum. Line 2's instructions don't say anything about pre or post tax contributions: quote:Include on line 2 only those amounts
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Nov 21, 2012 22:28
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Xenoborg posted:I'm not seeing this on either the form or the instructions. Line 2 is where you put your contribution in and lines 3-11 are computing your maximum. Line 2's instructions don't say anything about pre or post tax contributions: The $1000 is through an employers cafeteria plan. They call them that even though it doesn't have anything to do with food.
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Nov 21, 2012 22:47
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furushotakeru posted:The $1000 is through an employers cafeteria plan. They call them that even though it doesn't have anything to do with food. Oh, it all works out now. I read the Wikipedia page on cafeteria plans and that didn't really sound like what we had. I'll check with HR next Monday and confirm. Thanks furushotakeru.
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Nov 21, 2012 22:51
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Orange_Lazarus posted:Kinda new to this so bare with me, No. Contributions to (deductible) IRAs reduce your taxible income dollar-for-dollar - NOT your tax liability. In other words, if you're in the 25% marginal bracket, putting $4k in an IRA reduces your taxes by $1k. If you've got very limited deductions and you've got a good idea of what your income will be, it's pretty easy to estimate what your yearly taxes will be. Once you know what your taxes are, go to https://www.paycheckcity.com and use their paycheck calculator. Adjust the W-4 exemptions until the taxes withheld equal a little more than what you project you'll owe. You won't get hit for an underpayment penalty unless you've REALLY underpaid. If you're single with no deductions, that's pretty unlikely.
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Nov 23, 2012 21:18
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I have a question about business deductions. My father is a dentist and currently deducts his cell phone bill as a business expense since he is required to be reachable at all times for emergencies. I would like to save the some expense by putting their phones on my family plan. Will he be able to still deduct his portion of the bill? Will I need to send him a copy of my bill as well as a written statement indicating his portion?
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Nov 26, 2012 18:36
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Medikit posted:I have a question about business deductions. My father is a dentist and currently deducts his cell phone bill as a business expense since he is required to be reachable at all times for emergencies. I would like to save the some expense by putting their phones on my family plan. Will he be able to still deduct his portion of the bill? Will I need to send him a copy of my bill as well as a written statement indicating his portion? That would be a good idea.
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Nov 26, 2012 21:50
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furushotakeru posted:That would be a good idea. He should cut you a monthly check.
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Nov 26, 2012 22:23
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AbbiTheDog posted:He should cut you a monthly check. I agree. His father should cut me a monthly check, just to be safe 
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Nov 26, 2012 22:24
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furushotakeru posted:I agree. His father should cut me a monthly check, just to be safe Where'd you get five bucks? I want five bucks.
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Nov 27, 2012 00:44
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So I think I hosed up my withholding when I started my job at the beginning if this year. Instead of setting 1 personal allowance it's been set to 10 all year. It must not have cleared the 0 from the box when I tried to enter 1. Anyways, all the tax calculators I've been using are saying I'm going to owe 3-4k and might face penalties. Is there anything I can do to fix this? I've already changed it back to 1 as soon as I noticed (yesterday). Should I make additional withholdings? Or should I just pay up come tax time?
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Nov 28, 2012 17:18
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Haha, been there and done that. If it were me I would just sort it out when I file in a couple of months. We're practically at the end of the year already. I think the penalty will be something like 5% interest on the unpaid tax, which should amount to uh, $100-200, sounds like? I think Turbotax will compute the penalty for you, or the IRS will figure it out and bill you if you don't pay it when you file. That said, a surprise $4k tax bill sucks, sorry to hear it.
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Nov 28, 2012 17:32
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If he doesn't pay a penalty then doesn't he kinda come out on top? I mean he would have paid that money either way at least this way he gets to pay it at the end of the year when inflation could have possibly taken a chunk out of it. Basically just make sure you don't pay a penalty. edit: Back on cell-phones, my boss calls me on my cell sometimes after-work. Can I deduct the bill? Sephiroth_IRA fucked around with this message at 17:55 on Nov 28, 2012 |
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Nov 28, 2012 17:52
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IRS posted:Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. You should be able to figure out if you'll have to pay a penalty from that info. The penalty won't be that much though, probably less than $100, and it can be decreased by filing early this year. Orange_Lazarus posted:edit: You're allowed to deduct a portion of your cell phone bill equal to the portion of time you use it for work in your Schedule A deductions. If your Schedule A were to be audited, proof of your payments, a written statement of the percentage of use for business and a letter from your employer saying you don't get reimbursed for such expenses would be enough for the IRS to accept it.
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Nov 28, 2012 18:23
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Epi Lepi posted:You're allowed to deduct a portion of your cell phone bill equal to the portion of time you use it for work in your Schedule A deductions. If your Schedule A were to be audited, proof of your payments, a written statement of the percentage of use for business and a letter from your employer saying you don't get reimbursed for such expenses would be enough for the IRS to accept it. Practical matter - probably can't deduct it anyways due to the limitations.
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Nov 28, 2012 20:56
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Thanks for the info guys. It looks like I would definitely have to pay the penalty, but if it's not that much I won't bother trying to weasel my way out of it. Just going to not worry much about it since there's nothing I can do for now.
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Nov 29, 2012 02:22
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Not sure if this is the place for this question, so sorry if I am mistaken. The short story is that I am considering withdrawing/closing all my funds from my Thrift Savings Plan. I would in turn use that to help pay my student loans from grad school. Should I assume that I'm going to take the ~28% tax hit on the withdrawal plus an additional 10% penalty? (For context: I left that job years ago and have already gone through grad school and been working in a new job for two years. My loans are out at 7.9%, which is absurdly high. I want to pay this as quickly as possible, and liquidating my TSP seems like an OK avenue. It's difficult to see me covering an 8% return on the TSP, particularly with how gloomy the economic outlook is.) Also, I really have no idea of the mechanics of how something like this would work. Will I get a check for the full amount and then have to pay taxes when I file my income taxes? Does the early withdrawal penalty get automatically withheld? I've been looking here (https://www.tsp.gov/planparticipation/withdrawals/withdrawingAccount.shtml#full) to try and answer some of these questions, but it's a bit more complicated than I thought. Would it be best to just hire an accountant to make sure I don't make any mistakes?
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Nov 29, 2012 20:16
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econdroidbot posted:Not sure if this is the place for this question, so sorry if I am mistaken. This is an absolutely terrible idea. Don't do this. I can't imagine what math you're using that leads you to think it's an "OK avenue". It's not just X% return vs 7.9% student loan interest. It's 7.9% tax deductible interest vs X% return & not having to pay a 10% penalty on your entire TSP account & the ordinary tax deferral. Assuming your TSP isn't a roth: yes, you'll be eating the 10% penalty on top of whatever your marginal rate is. You may have the option to have them withhold a portion of the total amount for federal taxes, otherwise they will send you a check for the full amount and the penalty/tax on the withdrawal will be due with your 1040. You don't need to hire an accountant for this.
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Nov 29, 2012 22:53
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Admiral101 posted:This is an absolutely terrible idea. Don't do this. I can't imagine what math you're using that leads you to think it's an "OK avenue". It's not just X% return vs 7.9% student loan interest. It's 7.9% tax deductible interest vs X% return & not having to pay a 10% penalty on your entire TSP account & the ordinary tax deferral. I agree that taking a 10% hit off the top is pretty terrible. There's no way around that fact! I also understand what you're saying about the deductible interest. However, that argument doesn't hold much water for me, as it is capped at $2,500, which I will easily cover (unfortunately) with the remainder of my loan payment. Moreover, the law is set to revert to only being able to take the deduction for the first 60 months of repayment. I'm already a couple of years in, so this deduction is going to end for me. Based on the value of my account the penalty will be a few grand. This isn't a life-changing amount of money to sock away for retirement and let compound interest take care of. It might grow to about $15,000 if I wait 30 years to retire, which won't make much of a difference. On the other hand, it is going to cost me approximately $3K in interest if I let the loan ride out. I'm obviously taking a shortcut, but my thought is that I can forgo a few grand in future earnings to save a few grand in interest cost and increase my current cash flow (NPV shows the values would be roughly equal). Maybe I'm thinking about this the wrong way, so by all means correct me. You also have a good point on the deferred tax argument. It's pretty safe to say that I will be making less money in retirement than when working, so I should be taxed at a lower rate, which would be something like a 10%-15% difference. One other thing on my mind is that I currently get ~20% of my salary put into a retirement account by my company. So I am still saving for retirement, but it is in a different account. That money is going to dwarf the amount in the account I'm thinking of closing. The different penalty/tax/etc. rates on closing that account will add up to a high rate, but the dollars just aren't that much. For my peace of mind it would be great to close the account and eliminate ~30% of my student loan debt. There is certainly a cost in future growth/income, so I'm trying to figure out when that cost becomes too high. Any other thoughts would be much appreciated! Thanks, Admiral101!
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Nov 30, 2012 01:11
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I also think it's a terrible idea, but if you run your NPV calculations by me I'll see if I need to reconsider.
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Nov 30, 2012 01:32
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