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Thread: simple/quick tax question

  1. #1
    Picaresque
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    Default simple/quick tax question

    If I filed my taxes tomorrow, would I have to pay anything I owe immediately? Or would I have until April 15 to come up with the money?

    I don't have two dimes to rub together right now, but I want to get the filing over with, and I'm sure if I pulled a lot of doubles I could have whatever I might owe by April 15. So when do they expect the money?

  2. #2
    Banned Melonie's Avatar
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    Default Re: simple/quick tax question

    well that's not as simple of a question as you might think.

    The short answer to your question is that the IRS will expect payment to be sent along with your tax return filing. From that standpoint, the tax return is due to be filed by April 15th at the latest.

    But the IRS actually expected you to pay estimated taxes every three months right along with your earnings throughout 2007 ... assuming that you had 2007 earnings that spanned the entire year.

    The best way to explain this is probably with an example. Let's say there's a dancer that averages say $1000 per week in gross earnings. So for the first quarter of 2007 (Jan 1 to Mar 31) she grossed $13,000. By April 15th of 2007 (i.e. a year ago) the IRS expected her to send in a check for estimated taxes on that $13,000 of earnings ... which might have amounted to $2,500 between self employment tax and income tax.

    For the second quarter of 2007 (April 1 to June 1) she grossed $8,000. By June 15th of 2007 the IRS expecter her to send in a check for estimated taxes on that $8,000 of earnings ... which might have amounted to $1,500 between self employment tax and income tax

    For the third quarter of 2007 (June 1 to Sept 1) she grossed $ 15,000. By September 15 of 2007 the IRS expected her to send in a check for estimated taxes on that $ 15,000 of earnings ... which might have amounted to $3,000 between self employment tax and income tax

    For the fourth quarter of 2007 (September 1 to January 1) she also grossed $ 15,000. By January 15th of 2008 the IRS expected her to send in a check for estimated taxes on that $15,000 of earnings ... which also amounted to $3,000 between self employment tax and income tax

    So the long answer is that by the time this dancer files her tax return to beat the April 15th 2008 filing deadline, if she hasn't made estimated tax payments she will of course owe $ 2,500 + $1,500 + $3,000 + $3,000 = $10,000 in straight up taxes. However, at the end of each quarter for which she failed to send in an estimated tax payment, the IRS started charging interest on those 'unpaid' estimated taxes. In 2007 the interest rate on underpayments was 8%. So in addition to the $10,000 owed for straight up taxes, she now also owes approximately $200 + $90 + $120 + $60 = $372 in interest to the IRS.

    In addition to the interest charges, the IRS also assesses a penalty charge if the amount of unpaid estimated tax payments falls below 90% of the actual estimated taxes due at the end of each quarter. For 2007 the penalty interest rate is about 4%. So in addition to the $10,000 owed for straight up taxes, and in addition to the $372 in interest charges, she will also owe about $186 in underwithholding penalty charge ... bringing her total 2007 tax bill to $10,558 if paid by April 15th 2008.

    Of course estimated taxes are also due by April 15th 2008 for her January 1 through April 1 2008 earnings ... which amounts to an additional $2,500 estimated tax payment being due on top of the $10,558 also due for taxes on 2007 income.

    Of course, if she isn't able to pay the $10,558 for 2007 taxes and/or the $2,500 for first quarter 2008 estimated taxes any unpaid amount then rolls ahead another quarter. Another interest charge ( one quarter's worth at 8% annualized = about 2% = about $261 ) is assessed on the entire $13,058 unpaid balance, and another underwithholding penalty will also accrue.

    So the long answer to your question is that if you haven't made estimated tax payments quarterly throughout last year, you're already behind the deadlines with the IRS.

  3. #3
    Picaresque
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    Default Re: simple/quick tax question

    lol I appreciate your answer, but it's not as complicated or distressing as all that. I have paid my estimated taxes all along. So I'm only asking about paying any difference there might be between owed taxes for 2007 minus the estimated tax $ which I've already paid.

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    Default Re: simple/quick tax question

    If you are filing early, you can schedule your payment for withdrawal from your account on a future date, up to and including April 15, 2008.

    from the instructions to form 1040 for 2007.


    If you pay by credit card they charge a convenience fee but that would delay the bill depending on your billing cycle by a month or more.

  5. #5
    Banned Melonie's Avatar
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    Default Re: simple/quick tax question

    lol I appreciate your answer, but it's not as complicated or distressing as all that. I have paid my estimated taxes all along. So I'm only asking about paying any difference there might be between owed taxes for 2007 minus the estimated tax $ which I've already paid.
    then the 'short' answer applies ... you need to send your payment along with your tax return, and the deadline is April 15th. Attempting to file a tax return without a payment enclosed will create far more problems than simply waiting a few extra weeks until the deadline to file.

  6. #6
    Picaresque
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    Default Re: simple/quick tax question

    ok, thanks

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    Default Re: simple/quick tax question

    If you file an extension for 6 months you only have to pay the estimated taxs.

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    Banned Melonie's Avatar
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    Default Re: simple/quick tax question

    ^^^ actually, extension or no extension really doesn't make any difference in the long run ... other than more accumulated interests and potential penalties on any shortfall between estimated taxes paid and actual taxes owed.

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    Default Re: simple/quick tax question

    But the IRS usually won't bother tacking on penalties if the correction amounts to less than $1,000. Its always good to be on the safe and cautious side, per Melonie.

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