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Thread: I will dig myself outts this $$$ pit, but need some advice...earnings, taxes, etc.

  1. #1
    Veteran Member BlondebombGA's Avatar
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    Dizzy I will dig myself outts this $$$ pit, but need some advice...earnings, taxes, etc.

    This was my first year filing as an Independent Cont. where I made enough to get myself into trouble. I made some mistakes, but need some advice on prioritizing my way out of it. I didn't do quarterlies as I went through some hardships this past year and used that money with plans to catch up of course. (mistake I know) I had LOTS of legit, IRS acceptable write offs, thousands of dollars worth, and my CPA still shocked me with a tax bill of a bit over $9000.00. I honestly thought it would be a quarter of this. I sent in a small amount with the extension that had to be done anyway due to a form that had not yet come in.

    Due to making it my priority this year to pay off some debt I have been holding and saving much more, I can already see my income will be increasing by at least $20,000+ this year. But after doing a VERY thorough budget recently, I am really getting frustrated at how I will accomplish all of this. Never the less I will somehow, but I am just trying to figure out how best to accomplish this.

    1. Even with busting my ass, I do not see myself raising the entire amount owed for my 2013 taxes by October 15th while taking care of other financial obligations. I have this years taxes included in my monthly budget plus the additional for my increase in income. Is my thinking correct that the best move for me is to keep up with sending current quarterly taxes in, and biting the bullet and doing a financing for my 2013? I HATE putting myself on their radar like this. Should I instead focus on throwing every tax dollar I make at 2013 instead making smaller quarterly payments? Is the fact that I am having to have them finance anything as bad as I think it is?

    2. So I am upping my advertising and a few other areas this year to cut the next tax bill down. How much is too much? Is there a point that will cause me to be flagged even if it is all legitimate small business expenses? I would rather invest in my "company" then throw it at the gov. like I clumsily did last year.

    3. And last, from my understanding contributions to a Roth IRA are not dollar for dollar write offs but more that that amount will not be taxed. Is there anything for retirement that can be written off dollar for dollar? At this point, until I get myself out of this mess I don't know how I can fund a retirement plan well unless I can subtract from estimated taxes as I am really squeezed already.

    I am just super frustrated right now, as I am generally very frugal, the debt I have is mostly for my vanilla career investment which is slowly coming together, and it seems the more I make it doesn't help much at all. Snowballing my debt has been slowed down, and savings has too...and yet I am f*cking working more than ever!!! Grrrr....just ranting now, but I do hope to get some sage advice about the main questions.
    Last edited by BlondebombGA; 05-29-2014 at 04:34 PM.


  2. #2
    Banned Melonie's Avatar
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    Default Re: I will dig myself outts this $$$ pit, but need some advice...earnings, taxes, etc

    #1 - In the final analysis, it's best to avoid IRS monthly repayment plans ... because this does indeed send a clear message that you have been 'irresponsible' in regard to past tax compliance. As to how much of a factor being 'forced' to enter into an IRS monthly payment plan might be relative to increased chances of audit for your 'sole proprietor' business, all that can be said with certainty is that this 'doesn't help'. However, at this point, the IRS may no longer accept an application for a 2013 monthly repayment plan ... because even though you extended your tax filing deadline this did not extend the deadline by which 2013 tax money was due or by which an 'automatic' monthly repayment plan could be applied for. An option would be to 'short' your 2014 quarterly estimated tax payments in favor of paying off your 2013 tax obligations ASAP ... and then if necessary go the IRS monthly repayment plan route for 2014 taxes next April.

    #2 - it's difficult to say in dollar / percentage terms at what level the IRS might consider business expenses to be 'excessive'. I'm told that this actually comes from overall averages which stem from the tens of thousands of other 'sole proprietor' businesses which file tax returns under the same NAICS code.

    #3 - indeed Roth IRA's provide zero tax benefit in the year the contributions take place. A SEP-IRA does provide tax benefits in the year the contributions are made, in exchange for having to pay additional income taxes when the SEP-IRA money is eventually withdrawn in future years. However, it's no longer possible to set up any IRA that would allow a contribution reducing 2013 taxable income level. For 2014, you're better off diverting any extra money to paying off your 2013 tax obligations first, and your 2014 estimated tax obligations second.

    Beyond that, all I can say about prioritizing 'other' financial obligations over paying the IRS is that those 'other' parties do not have the power to seize your bank account balance, to place a lien on your car title, etc. without 'due process' in the way that the IRS can. Thus it's not impossible that the IRS, with very little warning, could seize money you are saving up to make 2014 quarterly estimated tax payments and/or to make payments toward 'other' financial obligations as 'escrow' for unpaid 2013 taxes ... at which point you'd have to go to tax court ( and pay an attorney / service ) to get the liens removed to be able to access your money again. Granted that it usually requires a fairly long time for the IRS to take such actions.

    Also, between the IRS interest rate, plus IRS penalty charges, it often turns out to be cheaper in overall dollar terms to pay the IRS at the expense of overdue credit card bills etc. After all, in a worst case scenario, you can declare bankruptcy on credit card and 'other' debt, but not on unpaid taxes. And in regard to affect on credit rating, IRS liens are the absolute worst since they take priority over every 'other' lender.

    In terms of frustration factor, it may help to start thinking of unpaid quarterly estimated tax payments as being no different than taking out an additional loan for $2-3-5,000 every three months that carries a ~7-17% interest rate. The IRS considers the tax money to be due by the quarterly estimated payment deadlines, and starts charging interest for any unpaid 'balance' immedlately. The only pragmatic difference is that, unlike some 'other' lender, the IRS will not start sending you 'late payment' notices immediately. Instead, the IRS quietly allows all of this equivalent 'debt' to pile up for 15+ months ... but at some point they will demand immediate repayment plus penalty and interest charges. If you are unable to pay, the IRS then shifts 'collection' efforts into gear using collection 'tools' that are far more effective, and which provide far fewer 'borrower's rights', than any ordinary collection agency. And at that point, to arrive at a repayment plan / settlement agreement with the IRS, it will be necessary to involve an attorney or tax resolution service ( at extra cost to you, of course )
    Last edited by Melonie; 05-30-2014 at 03:03 AM.

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    Default Re: I will dig myself outts this $$$ pit, but need some advice...earnings, taxes, etc

    Pay old taxes first

    They are not 'mad' about unpaid quarterlies but they are about last years taxes.

    Once last years taxes are paid, start on anything towards this years, not before

  4. The Following User Says Thank You to oldster For This Useful Post:


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    Veteran Member BlondebombGA's Avatar
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    Default Re: I will dig myself outts this $$$ pit, but need some advice...earnings, taxes, etc

    Gotcha. So glad I asked!!!!

    Thank you so much for all the thorough info Melanie. I can definitely pay by the deadline if I funnel this year's remaining quarterlies, savings, and money from a few other places to my 2013 taxes. Lesson learned.

    Thanks oldster...I do not want the IRS 'mad' at me. Lol.


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    Default Re: I will dig myself outts this $$$ pit, but need some advice...earnings, taxes, etc

    ^^^ just a reminder that you've ALREADY missed the deadline for making payments for taxes owed on 2013 income ... which was last April 15th. Again, applying for an 'extension' on filing your 2013 tax return does NOT similarly extend the April 15th deadline on 2013 tax payments being due.

    Sending in your 'late' payment along with your 'extended deadline' 2013 tax return in October ... as well as sending in an additional amount to cover IRS interest charges which began accruing last April 16th ... will hopefully satisfy the IRS to the point where they won't decide to 'investigate' further and won't assess a separate penalty charge for non-payment of estimated taxes.


    For the benefit of other dancers and camgirls, BlondeBombGA's experience finding herself behind the proverbial '8 Ball' where taxes are concerned is indeed an 'uncomfortable' position to find yourself in. Back in the 'good ol' days', dancers and camgirls did not have their incomes automatically reported to the IRS in the way it is today via strip clubs and webcam hosts issuing 1099's. Similarly, back in the 'good ol' days', the IRS did not receive automatic reports on the 'spending' side sent out by banks, brokerages, college bursar's offices, state motor vehicle agencies, etc. Thus in 'real world' terms, dancers and camgirls in the 'good ol' days' were able to treat paying taxes as 'optional'.

    Obviously, this is no longer the case today. Thus dancers and camgirls must face the inevitability of having to pay 20-25-30% of their gross earnings toward federal taxes. And failing to self-withhold that 20-25-30% of their gross earnings to make quarterly estimated tax payments can and will result in the dancer or camgirl facing an April 15th deadline of having to pay not only 20-25-30% of last year's gross earnings toward taxes owed on previous year's income, but also having to pay 20-25-30% of their January through March current year income in the form of first quarter estimated taxes. This creates a huge 'cash crunch' ... which most dancers and camgirls will have great difficulty 'coughing up'.

    If you are unable to 'cough up' the huge amount of cash, a situation then develops where future income must be used to not only pay estimated taxes due on that current year income, but also used to pay back taxes owed on last year's income, and also used to pay IRS interest and penalty charges. To get out from behind this proverbial '8 Ball' in a single year, the normal 20-25-30% self-withholding must be increased to 40-50-60% on future income. Indeed, this is a very heavy 'burden' to bear.
    Last edited by Melonie; 05-31-2014 at 05:31 AM.

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