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Non refundable means it can only offset total tax obligation. Tax obligation is the total amount of money you owe for tax for the year. Withholdings are you prepaying that amount through the year. As long as your total tax is greater than the credit, you'll take full advantage of the credit and receive a refund of your (now) excess withholdings. And yeah, credits are totally separate from the standard deduction. You can still take your standard deduction just fine.
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Jun 16, 2023 06:01
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You take your total tax liability and first subtract the non-refundable credits, down to zero. Then you subtract the refundable credits. If it is above zero, balance due, if it is below zero, refund. Withholding is a fully refundable credit. So if your tax liability is reduced to zero because of nonrefundable credits then you get all of your withholding back.
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Jun 16, 2023 17:22
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For the last few years I have been helping my father with his finances. I have a full POA with him and all tax filings in the past were very straight forward and he owed no taxes when I filed for him. However, this year in addition to his monthly SS Benefits, he started his RMD and has a large long term capital gains from stocks sold in Q1 2023 and monthly interest income from recently purchased CDs. I estimate his 2023 tax payment will be around $10,000. He lives in a state with no income tax. His SS or RMD does not have anything withheld and in combination with the capital gains and interest income, my understanding is that we will have to make a payment to the IRS this year. I helped him setup his IRS Online account so this should be fairly straightforward but am I missing anything crucial here? Do I just have to get as close to the estimated tax amount and if it's over he'll get a refund in 2024? From what I've read online, we have already missed the Q1 2023 deadline to pay estimated taxes. But on the other hand, we may not have to pay estimated taxes considering his 2022 tax liability was $0.
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Jun 17, 2023 12:55
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Busy Bee posted:I helped him setup his IRS Online account so this should be fairly straightforward but am I missing anything crucial here? Do I just have to get as close to the estimated tax amount and if it's over he'll get a refund in 2024? You only need to get into the safe harbor, then you can just true up at tax time. You've technically missed the deadline and could get hit with interest, but I believe because last year it was $0 then you've paid at least 90% of last years taxes and are in the safe harbor. https://www.hrblock.com/tax-center/irs/tax-responsibilities/avoiding-underpayment-tax-penalty/ But overall yeah - guess his total income, slap it into the Tax Tables, divide by 4, and send it to the IRS via the portal on form 1040-ES.
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Jun 17, 2023 14:39
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It's 100% of last year's taxes (90% of the current year tax liability) to avoid the penalty, but yeah. He shouldn't have any underpayment penalty for 2023 given a $0 tax liability in 2022. You/he will still have to pay the full balance due by the 2023 due date though, so it may be easier to make some estimated payments so you're not cutting a single massive check.
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Jun 17, 2023 16:54
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Thank you both. This is all new to me and since I have never been in this situation and I always thought anyone could just pay their taxes due by the filing deadline. However, I am still a little confused about the 90% of the current year tax liability / 100% of last year's taxes meaning. So let's say for the year 2023 he owes $10,000 to the IRS which is fully paid off when he files by the April 2024 deadline. What happens for his 2024 tax year with this 90% / 100% number if he has the same estimated $10,000 estimated taxes owed from selling more stock in that year? In this case, I'm assuming he will have to pay estimated taxes in 2024 and not during the April 2025 filing deadline.
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Jun 17, 2023 17:25
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If he owes $10k for 2023 (to be paid April 15, 2024), and you estimate 2024 will be the same, then he should make 4 quarterly payments of $2500 in 2024.
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Jun 17, 2023 18:31
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There's 3 potential thresholds used when determining underpayment penalties (i.e didn't pay enough before the due date.) 1. Did you pay at least 90% of the current year tax due? 2. Did you pay at least 100% of the prior year tax due? 3. Is the current year balance owed less than $1000? If you can say yes to any of these 3, you do not owe any underpayment penalty and simply must pay the balance. If you fail all 3, the difference between your prepayment and the threshold you were closest to meeting is used to calculate the underpayment penalty. Generally, if you expect to owe and can afford to make estimated payments, paying more never hurts from a tax perspective. Worst case, you overpay and get the excess back as a refund. This is obviously not ideal from a free cash flow perspective, but that's a whole other ball game.
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Jun 17, 2023 19:00
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Guy Axlerod posted:If he owes $10k for 2023 (to be paid April 15, 2024), and you estimate 2024 will be the same, then he should make 4 quarterly payments of $2500 in 2024. And we will be required to make the estimated payments in 2024 since we would be answering NO to all of the 3 below potential thresholds, correct? Unless would we say YES to number 2 since we did pay 100% of the prior year tax due or am I misunderstanding this? Winged Orpheus posted:There's 3 potential thresholds used when determining underpayment penalties (i.e didn't pay enough before the due date.)
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Jun 18, 2023 18:22
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Busy Bee posted:And we will be required to make the estimated payments in 2024 since we would be answering NO to all of the 3 below potential thresholds, correct? Unless would we say YES to number 2 since we did pay 100% of the prior year tax due or am I misunderstanding this? Saying YES to number 2 would be you having paid $10,000 towards the amount that is due for April 2025. It does not refer to the $10,000 you paid due April 2024 for the 2023 tax year.
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Jun 18, 2023 18:55
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Got it, that makes sense. The IRS website says: "If you don't pay enough tax by the due date of each payment period, you may be charged a penalty even if you're due a refund when you file your income tax return at the end of the year." I see that there are 4 payment deadlines per year - I'm assuming that it's possible to pay the whole estimated amount for that tax year in the first payment period with the IRS without any issues, correct? Would be easier to just get it done with without having to estimate his tax payments per quarter and making sure to get as close or over to the overall estimated tax payment as possible. I take it that we can go to his IRS online account, pay the estimated taxes via one of the payment service providers e.g payUSAtax and use "1040-ES" as the Payment Category. Then when filing his taxes the following year by the deadline, we include this amount when asked in TurboTax. On the other hand, when I was reviewing the IRS 1040-ES form, I thought it was funny that they had to mention this: quote:No checks of $100 million or more accepted. The IRS can’t accept a single check (including a cashier’s check) for amounts of $100,000,000 ($100 million) or more. If you are sending $100 million or more by check, you will need to spread the payment over 2 or more checks with each check made out for an amount less than $100 million. This limit doesn’t apply to other methods of payment (such as electronic payments). Please consider a method of payment other than check if the amount of the payment is over $100 million.
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Jun 18, 2023 19:52
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Busy Bee posted:No checks of $100 million or more accepted. The IRS can’t accept a single check (including a cashier’s check) for amounts of $100,000,000 ($100 million) or more. If you are sending $100 million or more by check, you will need to spread the payment over 2 or more checks with each check made out for an amount less than $100 million. This limit doesn’t apply to other methods of payment (such as electronic payments). Please consider a method of payment other than check if the amount of the payment is over $100 million. That might actually be due to some sort of banking laws to prevent fraud/laundering; I seem to recall there can be issues with such rules if your refund is too big also (not that you can't get it, but I think certain methods aren't acceptable).
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Jun 19, 2023 10:04
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MadDogMike posted:That might actually be due to some sort of banking laws to prevent fraud/laundering; I seem to recall there can be issues with such rules if your refund is too big also (not that you can't get it, but I think certain methods aren't acceptable). Sounds like the IRS is advocating for smurfing though?
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Jun 19, 2023 16:25
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Heyo! So I was sent over from the IT thread, maybe I can get some guidance here. I'm starting a new job, and the comp situation is very new, and I want to approach it with insight.
In the past, I've only had a 401k, so I never had to worry, I just contributed the max match amount, and put $6500 in Mrs Nintendo-Users IRA. This situation is more complex.
Probably I need to get some more detailed advice from a real professional, since my situation is really different. Super-NintendoUser fucked around with this message at 16:48 on Jun 27, 2023 |
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Jun 27, 2023 16:39
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Maybe this is pedantic, but wouldn’t that be an annual TC of 187,500, from 150k base + 37.5k stock? I thought TC included RSUs e: if I’m wrong, someone correct me since I’m in a negotiation soon
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Jun 27, 2023 16:47
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PRADA SLUT posted:Maybe this is pedantic, but wouldn’t that be an annual TC of 187,500, from 150k base + 37.5k stock? sorry, switched the wording, base salary = 150k, RSU grant = 150k
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Jun 27, 2023 16:48
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This thread is mostly for tax specific questions. Depending on what you want to do, you may be best served in the Long Term Investing & Retirement thread https://forums.somethingawful.com/showthread.php?threadid=2892928 That thread covers a lot of tax topics around retirement savings, ESPP's, etc. There's a lot of posters there in similar situations as you with RSU's, ESPP, etc. Your situation is fairly common. Personally I dislike ESPP's because at this point they're nothing but another company gift to highly compensated employees that can afford to participate in them. Read the rules of your ESPP plan very carefully, especially regarding any holding period or limitation on when you can sell. It depends on the plan but often they're not worth participating in when it's all said and done. I"m not a pro, but at your income level you probably want to max out all of your standard 401K space before you start thinking about a backdoor roth. You also aren't making over the Roth IRA income limits unless Mrs SNU works as well and your MAGI would be above the 228K limit.
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Jun 27, 2023 17:08
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Random question for other preparers. I used to have a sweet excel sheet to help double-check myself when doing 1031 exchanges, but I must have lost it or something, anyone have one they like to use?
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Jun 27, 2023 21:03
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Epi Lepi posted:Random question for other preparers. I used to have a sweet excel sheet to help double-check myself when doing 1031 exchanges, but I must have lost it or something, anyone have one they like to use? Sorry, mine's based in our software, though if anybody else has one I'd love the extra planning tool also.
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Jun 29, 2023 19:46
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What can you tell me about the self employment tax for 1099 filers? It's led to a major payment difference this year.
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Jul 4, 2023 19:08
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When you are a W-2 employee then your employer pays some tax for social security and Medicare for you. When they switch you to 1099 then they don’t have to pay that any more. Your new employer (you) has to pay it instead.
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Jul 4, 2023 19:20
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Sure, but this didn't seem to be a thing last year.
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Jul 4, 2023 19:23
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Jaxyon posted:Sure, but this didn't seem to be a thing last year. How much self-employment income did you have last year, and how much do you have this year?
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Jul 4, 2023 20:25
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Jaxyon posted:Sure, but this didn't seem to be a thing last year. It's always been a thing.
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Jul 4, 2023 20:51
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Jaxyon posted:Sure, but this didn't seem to be a thing last year. Did you have a 6-figure salary from a W-2 job last year that capped out your Social Security taxes, so it made it seem like self-employment taxes are lower?
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Jul 4, 2023 21:04
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I have a 6 figure W2 salary, partner has a 1099 income(and made less this year) My pay went up slightly. Filing joint.
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Jul 4, 2023 21:34
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Jaxyon posted:I have a 6 figure W2 salary, partner has a 1099 income(and made less this year) You having W-2 income wouldn’t affect your partner’s self-employment tax. All else equal, self-employment tax should be lower this year, not higher, and certainly not be the cause of owing more. The only way to figure things out is to compare both tax returns, line by line.
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Jul 4, 2023 22:08
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There is always the chance last year's is wrong! 
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Jul 4, 2023 22:13
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I believe that last year my partner was 1099-MISC and this year it was 1099-R
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Jul 4, 2023 22:25
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How do you know the self employment tax was the reason your tax bill was higher? The easiest way to tell would be to look at the Schedule SE page of your taxes this year and last and see whats different in your numbers, because tax law hasn't really changed.
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Jul 4, 2023 23:03
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Jaxyon posted:I believe that last year my partner was 1099-MISC and this year it was 1099-R I know nothing about your situation but there’s no way she received a 1099-R for work she did
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Jul 4, 2023 23:37
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1099-MISC was used for non employment income as well as other income not subject to SE tax until 2020 I think. These days you should be getting 1099-NEC which software will automatically put on Schedule C and Schedule SE. If you got a 1099-MISC in the past it should have been treated as above, but could have been put as Other Income which doesn't get SE taxed? As a W2 employee, the advice I've heard for evaluating 1099 job offers is to double your hourly wage to cover taxes/benefits/etc
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Jul 5, 2023 04:43
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Jobert posted:1099-MISC was used for non employment income as well as other income not subject to SE tax until 2020 I think. These days you should be getting 1099-NEC which software will automatically put on Schedule C and Schedule SE. oooooh yes it's 1099 NEC now and I'm guessing it was put as other income when it was MISC Guessing that was not how it was supposed to be done? My partner works as a 1099 employee at a place that they have hours and a boss, which is, I know, a scam for the boss to not pay for a w2, but a lot of people do that. Jaxyon fucked around with this message at 18:03 on Jul 5, 2023 |
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Jul 5, 2023 18:00
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Isn’t having someone else set your hours one of the contraindicators of being a 1099?
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Jul 5, 2023 18:05
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withak posted:Isn’t having someone else set your hours one of the contraindicators of being a 1099? Yep but a lot of small businesses do this
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Jul 5, 2023 18:52
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Jaxyon posted:Yep but a lot of small businesses do this There's a form you can file to get the IRS to say "no, this is W-2 work not self employment", but in practical terms you'll probably wind up fired from said job if you do that  . Very common trick though.
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Jul 6, 2023 02:12
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Get a new job that doesn't try to blatantly gently caress you over and then file the form.
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Jul 6, 2023 02:28
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MadDogMike posted:There's a form you can file to get the IRS to say "no, this is W-2 work not self employment", but in practical terms you'll probably wind up fired from said job if you do that Wow, what a scam. You literally have to narc on yourself as the reporter as though there won't be any retaliation. Businesses can get right with the IRS for 10% of the tax they were supposed to pay. Near as I can tell you don't then get a W-2 as an employee, it's just straight wage theft? Am I reading this right? https://www.irs.gov/forms-pubs/about-form-8952 Seems like the employee should get some of that money back. And that you should be able to anonymously narc on your job.
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Jul 6, 2023 03:39
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H110Hawk posted:Wow, what a scam. You literally have to narc on yourself as the reporter as though there won't be any retaliation. Businesses can get right with the IRS for 10% of the tax they were supposed to pay. Near as I can tell you don't then get a W-2 as an employee, it's just straight wage theft? Am I reading this right? Yeah it's hosed
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Jul 6, 2023 05:45
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H110Hawk posted:Wow, what a scam. You literally have to narc on yourself as the reporter as though there won't be any retaliation. Businesses can get right with the IRS for 10% of the tax they were supposed to pay. Near as I can tell you don't then get a W-2 as an employee, it's just straight wage theft? Am I reading this right? You are not reading that right. The 8952 is only when the employer wants to correct its behavior, voluntarily and unprompted. An employee who wants to challenge the 1099 files Form 8919 and SS-8, and if the employee is found to be correct, the employer is liable for the full half of the social security and Medicare taxes. Retaliation is a real fear and my experience is that people do not do the 8919 unless they’ve quit or been fired. If they’ve been fired, then they will usually file for unemployment compensation as well, and in my state that is an express ticket to an employer audit.
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Jul 6, 2023 13:50
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