More Cam Tax Questions :)
As a cam girl, I know that I'm supposed to pay estimated taxes, but do I need to pay annual taxes too? If so, would annual taxes require different fees besides the 33% that I would be paying for estimated taxes?
What forms do I need for filing my taxes?
and finally, how exactly do estimated taxes work? Do I estimate how much I'm going to make for the year? For example, If I estimate that I will make $48,000 and 33% of that is $15,840, do I pay $3,960 every quarter, for the four quarters?
Re: More Cam Tax Questions :)
Besides sending in a check for estimated taxes with each of the four quarterly 1040-ES estimated tax filings, you may also need to send another check along with your annual tax return filing. But on the other hand you may also get a refund check from the IRS. The basic idea is that each of the quarterly estimated tax payments is a 'guess', whereas the annual tax return filiing of form 1040 plus Schedule C is accurate down to the nearest dollar. Thus any differences between your estimated tax 'guesses' and your actual tax liability gets 'trued up' when you file your annual tax return.
In theory, you are supposed to 'tweak' your quarterly estimated tax payment amounts to reflect your actual earnings during that particular quarter. This varies both with the number of actual weeks included in each quarter ( 2nd quarter is short, 4th quarter is long ) and with your particular variations in actual weekly income.
Re: More Cam Tax Questions :)
Woah woah woah.. what are you talking about Melonie? I've followed you every step of the way with the 1040-ES and MI-1040ES forms, but sending in an extra check with your annual tax return filing? On what basis? You said that you *may* be eligible for a refund? Clarify, please!
Re: More Cam Tax Questions :)
^^^ very simple. When you fill out your annual tax return i.e. 1040 with Schedule C, you finally get to include the cumulative effects of every deduction and exemption. This allows you to calculate the amount you actually owe for taxes over the course of the entire previous year. Up until that point you have been taking guesses as to what effective tax rate will actually apply to you, based on incomplete financial information and various assumptions. So the probability that the total amount of your 4 quarterly estimated tax payments isn't exactly equal to your actual tax obligations is 100% !!! If your actual tax obligation is higher than your total estimated tax payments for the year, you will need to write yet another check for the difference. If your actual tax obligation is less than your total estimated tax payments for the year, you will file for a refund and receive a check from the IRS.
And there is also the issue that first quarter estimated taxes for the following year are also due on April 15th along with your previous year's 1040 plus Schedule C tax return ! So some dancers directly apply any IRS refund they are owed toward their 1st quarter estimated tax payment and send a 'smaller' 1st quarter estimated tax payment check than would otherwise be required.
Re: More Cam Tax Questions :)
So if you directly apply any IRS refund you are owed to your 1st quarter estimated tax payment then they just won't send you a check and it'll be all hunky dorey? Do you just tell them "nah, don't bother with the check I already deducted it from my 1st quarter estimated tax payment"?
Re: More Cam Tax Questions :)
^^^ actually, there is a line entry on the 1040 form for the specific purpose of applying some or all of a 'refund' amount towards ( first quarter ) estimated taxes. Assuming that the amount of the 'refund' is not sufficient to cover the total amount of first quarter estimated taxes due, you'll still have to send a first quarter estimated tax check ( just a check for a smaller amount than would otherwise be the case). Essentially you are telling the IRS exactly what you quoted !
Re: More Cam Tax Questions :)
One sends in estimated taxes quarterly (it is possible to do it monthly too.) Basically you are doing what an employer would do for an employee.
At the end of the year, you do your incomes taxes to find out the actual taxes owed. Subtract out the payments you made with estimated taxes. If it is a positive number, that is the amount you still owe. If it is a negative number, it's a refund.
The IRS helps with this worksheet form: Use this form to calculate the numbers to fill out the actual form used to go along with your payment.
The publication will tell you where to send the money. For example, for my business I pay at any federal reserve bank at the business window.
Here are the details and publications from the IRS relevant to estimated payments:
This might be a tool that can help:
You should set up an appointment with an accountant/CPA explaining you want to make estimated tax payments on your business, and if they could help with explaining how to do this. Now they are gonna try and sell you on letting them do it for you, and if the price is right, it might not be a bad idea. But most will certainly say "for the given information you have provided, your estimate would be blah."
Because your money earned probably bounces up and down a bit over the year, you are gonna need to adjust your estimate now and then (thats why a lot of people like quarterly - less adjusting.) There is such a thing as an estimated tax penalty, so if you screw up badly, they will fine you (the worksheet talks about this.)
Good luck - and welcome to navigating the American Tax System!
Re: More Cam Tax Questions :)
Quote:
Originally Posted by
Melonie
^^^ actually, there is a line entry on the 1040 form for the specific purpose of applying some or all of a 'refund' amount towards ( first quarter ) estimated taxes. Assuming that the amount of the 'refund' is not sufficient to cover the total amount of first quarter estimated taxes due, you'll still have to send a first quarter estimated tax check ( just a check for a smaller amount than would otherwise be the case). Essentially you are telling the IRS exactly what you quoted !
I'm a little confused. So are you saying that if you over-estimated for the previous three quarters, you can apply the refund money to the amount owed for the first quarter (which is due April 15th)?
Re: More Cam Tax Questions :)
She's saying that if you are going to deduct the value of your tax return from your Q1 payment of the following calendar year, then you still must send in a check if the return does not cover the value of the payment.
For example, if you are supposed to get $3,000 back from your 2010 tax return and your 2011 Q1 payment is $4,500, then you can deduct the $3,000 return value from the $4,500 Q1 payment but still must send in a check valued at $1,500 to cover the difference.
You can look at my tax cheat sheet for a better visual of the quarters:
http://i45.tinypic.com/234p5z.jpg
Re: More Cam Tax Questions :)
Laurisa basically covered it, but wasn't crystal clear about exactly how it happens. When you complete your 1040 tax return. based on your actual 2009 income versus your previous quarterly estimated tax payments made for the 4 quarters of 2009, it maybe shows that you are due a $3000 tax refund credit. You then get a 'choice' on the 1040 form. You can either have the gov't send you an actual refund check for the $3000, or you can have the gov't 'transfer' the $3000 automatically to your estimated tax account.
If that $3000 is enough to satisfy your first quarter 2010 estimated tax liability, then you don't need to send in a separate 1040-ES Q1 voucher with separate check. But if that $3000 won't cover, you WILL need to send in a separate 1040-ES Q1 voucher with a check to cover the difference. Following Laurisa's example, if $4500 is needed to totally cover your Q1 estimated tax liability, and if you choose to have $3000 in 2009 tax refund credit transferred to your estimated tax account ( instead of being sent to you as an actual tax refund check), then you'll also need to send in a 1040-ES Q1 voucher with a separate $1500 check so that your total estimated tax account 'balance' will be at $4500 by the April 15th Q1 estimated tax due date.
Also, if you only needed $2000 to satisfy your 2010 Q1 estimated tax liability, you could also choose to have the gov't 'transfer' just $2000 of the $3000 tax return refund 'credit' to your estimated tax account, and send you an actual tax refund check for the remaining $1000 .