What to do about Quarterly Tax Payment?
Here's the preface: Boyfriend moved out last month. He was my renter, so I'm taking a $700 loss/month. Moving on...business at my old workplace was so bad that I had to use savings to pay bills. A big part of the bad business was bad mgmt...let's just say the state of the economy was less of a factor, I went to work somewhere else. The new place is upscale, the old place wasn't. Upon being hired, I was told by mgmt that I must revamp my whole look to fit the workplace...no offense taken...cash spent...about $300. I do make better money where I am now, but because of these two transitions (loss of rental income and going to a different club), it has upset my plans to save for tax payments like I always do. I believe this is only temporary, as my $ potential has gone up.
So, had my tax appointment last week. My quarterly tax payments will be $1,200 for 2009. I usually put away money to pay quarterlies, but my aforementioned situation brought my savings used to pay taxes down to zero.
I have 4 shifts to make that $1,200 before April 15th. Not to mention I'll have my house fees and tip outs. I would work more, but I can't due to the fact that the club is closed on Easter Sunday, and I can't work 2 other nights because of night classes. I'm budgeting myself to the extreme for the next week...thank goodness I don't have kids because I'm only allowing $6 for food for myself for the next day.
My question is...should I use a credit to make my quarterly payment this ONE TIME? I don't like to use credit if I don't have to, but I feel under pressure that I only have so much time to make a certain amount of money. I'm concerned that the pressure is affecting my hustle...you know, the more you need $, the less you end up making.
I know I'm going to pay more in the long run paying back the card, so I've thought of trying to make as much as I can in the next 4 shifts, and if I have to, I'll use the card for whatever I need.
I just want to be free and clear of this payment, so I can start saving for the next one...June 16th.
My hustle is at it's best when I don't have something like this hanging over my head.
Any opinions/sugestions?/:O
Re: What to do about Quarterly Tax Payment?
A - you can skip the April payment and try to make up with a large June payment ... and accept an elevated risk that the IRS will take an elevated interest in your taxes
B - you can make the April payment via a credit card ... and pay interest to the underwriting bank instead of the IRS
C - you could make a 'short' April payment using whatever funds are still available to you ... which is better than option A but not as good as option B
Re: What to do about Quarterly Tax Payment?
Thanks, Melonie, for your input. Unfortunately, the IRS does not look kindly upon late or partial payments of quarterlies...I think I'm going to use tonight as a gauge.
At the club at now, most of the business on weeknights is business dudes from out of town, so although the club is not as packed as on weekends, the probability of making money is still there 'cuz business dudes from out of town always seem to spend SOME kind of money.
As of now, the card thing is my option especially after you pointed out that I would be paying interest to the bank instead of the IRS. Plus, interest over time is not as bad as getting in trouble with the tax man.
Much appreciated...wish me luck:-*
Re: What to do about Quarterly Tax Payment?
I would do one of the two following things:
1.) See if you can make a payment arrangement with the IRS. Usually they will make payment arrangements if you let them know this is what you need up front.
2.) Talk to your tax person and see if there is any way to claim more deductions or allowances that will ake the amount that you own down.
Personally, I would avoid putting it on a credit card unless you get a certain number of months with free interest, otherwise you will be adding to your bill.
Re: What to do about Quarterly Tax Payment?
I think you should just pay what you can. These are estimated quarterly tax payments!!! So if you didn't make as much as you did last year at this time it is ok to pay less!
Just keep track of how much you did pay and pay your other payments on time. Next year when you do your taxes with your accountant he/she will help you figure out if you overpaid or underpaid for the year.
Re: What to do about Quarterly Tax Payment?
Hate to shoot down your suggestions ladies, but I'm already on a payment plan with IRS paying back taxes for 3 years...long story...and I'm going to apply for an OIC next month, as I have a great case...SO one of the criteria to even be accepted for an OIC is keeping up on my current payments.
I think I would rather pay down credit card debt (I haven't used it in almost 2 years) than get denied my OIC, screw up my payment agreement I already have, or get levied, and go to jail.
Worked sucked so bad tonight...walked with $29 after payment...so this weekend better be good!
I'm still holding out hope, and I'm going to make as much $ as I can until I run out of time, then put the remaining balance on my card.
Thanks for the input so far!
Re: What to do about Quarterly Tax Payment?
Okay, given the new information that you have given us... I think I'd be re-evaluating those night classes. I hate to say that, but does missing the classes mean you would fail? Could you make up the work?
If it were me I would call the teachers and find out if the classes/work can be made up. Just tell them you have something really important that you need to get taken care of, because if you don't you'll be in a legal bind. Then work some double shifts and make as much as you can to help take care of those bills.
On the other hand, if you have only been walking out with about$29 per night, I'd say put it on the credit card until you can afford more and get your finances straightened out.
Re: What to do about Quarterly Tax Payment?
Your $1200 estimated tax payment was probably calculated by your accountant using 'safe harbor' provisions (most likely, it is 100% of prior year tax due). As such, if your current year business income is not tracking as high as last year, do not pay the full $1200. If business is better than normal in a later quarter, you can make it up then (this is all reconciled at the end of year on Form 2210 when filing your tax return). Otherwise, if you keep on your path of paying what your accountant tells you, you may end up with a large overpayment of your taxes and be due a refund. And if your Offer In Compromise is accepted, the IRS gets to keep the refund. Not nice.
So, with the above paragraph in mind, absolutely make your estimated payment on time. Just know that it is okay to pay less if the situation warrants. Also, I am not a fan of paying taxes with credit, but you gotta do what you gotta do.
Best Always,
Re: What to do about Quarterly Tax Payment?
^^ That's what I recollect about estimated payments (last year's basis, equal payments of this years estimate or more, or an amount based on what you earned as taxable incme for the current estimation period).
Let's say you use a Credit Card to make the whole payment, and you pay it back in its entirety by the time your next payment becomes due. If you do this, you will make the payment before they can charge you interest. And the interest would have been, say, 2% per month on $1200, which is only $24. Pay it back before your next payment due date and you don't even owe the $24 or the interest/penalties for a late estimate payment.