Results 1 to 6 of 6

Thread: Estimaterd tax payments when your pay changes?

  1. #1
    God/dess
    Joined
    Apr 2007
    Location
    The Diner State
    Posts
    5,085
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Estimaterd tax payments when your pay changes?

    I've been doing estimated tax payments for this year (well, one so far) and I'm pretty sure I'm going to make more than the Turbotax estimated for me, though how much I work depends on school. Is there a way to make estimated payments that change instead of estimating it at the beginning and paying that in 4 pieces? I don't want to have to pay a ton next April like I did this year.

    ETA: EstimaTED, not Terd. LOL

  2. #2
    Veteran Member BabyGirlKylie's Avatar
    Joined
    Apr 2005
    Location
    Chicago/ Las Vegas
    Posts
    297
    Thanks
    0
    Thanked 4 Times in 4 Posts

    Default Re: Estimaterd tax payments when your pay changes?

    I was wondering this too....but the opposite. Last year was my best year to date, so my estimated payments are pretty high for this year. However, I'm back in school and not going to make anywhere near what I made last year.
    My estimated payments are pretty close to what I make in two months now!
    So yes, what do we do if our est. payments no longer match our estimated income for 2008?
    "I believe that if life gives you lemons, you should make lemonade.
    And try to find somebody whose life has given them vodka and have a party."
    [SIGPIC][/SIGPIC]

    "You're not too smart, are you? I like that in a man."

  3. #3
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Estimaterd tax payments when your pay changes?

    Since the estimated tax filings go three months at a time, if you can see that your earnings for the last three months are coming in higher or lower than you originally anticipated, all you have to do is apply your effective tax rate to the greater or smaller amount of earnings (with a little 'Kentucky Windage' applied) and send in a higher or lower amount of quarterly estimated tax payment.

    The key is knowing what your own effective tax rate was last year ... which is pretty easily calculated based on last year's total taxes owed versus last year's adjusted gross income (from the tax return you filed). Typically for a single girl with no dependents this is going to fall in the 20% to 35% ballpark depending on her income level. You can then do some cheeze math based on applying last year's effective tax rate to the amount of money that you actually earned during the latest 3 month estimated tax period. The 'Kentucky Windage' gets factored in if your income has gone up (meaning that you need to raise the percentage a few points) or has gone down (meaning that you can lower the percentage a few points).

  4. #4
    God/dess
    Joined
    Apr 2007
    Location
    The Diner State
    Posts
    5,085
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: Estimaterd tax payments when your pay changes?

    Thanks Melonie! I was hoping it was that easy.

  5. #5
    Veteran Member Santos's Avatar
    Joined
    Apr 2003
    Posts
    389
    Thanks
    107
    Thanked 7 Times in 7 Posts

    Default Re: Estimated tax payments when your pay changes?

    Don't forget the "Safe Harbor" rule which means you will not be assessed any penalties as long as you pay the same amount of tax this year as you owed last year.

    For example: you paid $7000 in federal taxes last year, but you will owe $10,000 in federal taxes in 2008. As long as you pay $7000 in quarterly installments during 2008, you will not be charged any penalties* (although, you will still have to pay an additional $3000 in taxes when you file your 2008 return).

    In addition, you will not be assessed any penalties by the IRS as long as you pay at least 90% of your total tax during the tax year. Using the same example, you owe $10,000 but you only paid $9000 in quarterly installments. You will owe $1000 when you file your return, but since you paid 90% of your total tax due, you won't be assessed any penalties.

    For more info see: http://www.smartmoney.com/tax/filing...tory=estimated

    *The rule is slightly different if you earned more than 150K in 2007. See the above link for info on that situation.

  6. #6
    God/dess
    Joined
    Apr 2007
    Location
    The Diner State
    Posts
    5,085
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: Estimaterd tax payments when your pay changes?

    ^^ Good good. This is the sort of thing I was searching for on the IRS website.

    Not to be all, 'hey my post rocks' but maybe we need to sticky some of these beginner level Dollar Den posts? Or make a sticky with links in them?

Similar Threads

  1. Replies: 8
    Last Post: 04-07-2010, 07:17 PM
  2. Replies: 8
    Last Post: 04-02-2008, 05:43 PM
  3. Replies: 2
    Last Post: 02-23-2008, 02:52 PM
  4. Best way to pay tax debt
    By Pure in forum Dollar Den
    Replies: 7
    Last Post: 08-09-2007, 09:38 AM
  5. estimated tax payments?
    By Picaresque in forum Dollar Den
    Replies: 3
    Last Post: 04-16-2007, 07:35 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •