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Thread: start paying taxes now.. or backtrack???

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    Default start paying taxes now.. or backtrack???

    So here is my question.... I started dancing part time in late feb. of 05. I am married with just our one joint checking acct. I have NOT paid taxes thus far. Bad, I know....
    I want to start doing this Legit (may be divorced soon). Should I Start from the 4th qtr coming up soon and pay when due? Or do I backtrack from Feb. and pay everything I would have owed thus far? I need some advise on this...I'm trying to get myself lined up if I end up single soon. Any help would be appreciated. Thanks

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    Banned Melonie's Avatar
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    Default Re: start paying taxes now.. or backtrack???

    A key question of course is how you and your 'soon to be ex' are handling your mutual tax situation. Did you file a joint return for 2004 ? If you're going to be able/forced to file a joint tax return for 2005, then the tax liability from dancing is actually 1/2 yours and 1/2 his !

    On the flip side, if his 2005 income tax withholding results in an overpayment, then 1/2 of that refunded amount is technically yours ! Therefore it would make little or no sense for you to pony up the entire amount of estimated taxes due on your dancing income, since technically your 'soon to be ex' is legally responsible for half of that amount plus technically any overwithholding from his paycheck can be applied to your dancing income tax liability. Do you have a separation and property settlement agreement in place that addresses the tax issue ? What does your divorce attorney have to say ? Sometimes these tax issues can be a big bargaining chip in regard to property settlements.

    With a divorce in the offing, there is no way I would send more cash to the IRS until I at least knew whether or not 1/2 of that amount might wind up in your 'soon to be ex's' pocket. Even if the IRS does sting you for underwithholding, most likely half of the interest and penalty will have to be paid by your 'soon to be ex' as well ! At the very least, unless you know for a fact what your tax filing status will be for 2005 (i.e. married joint versus head of household versus single) you really have no way to calculate the appropriate amount of estimated taxes on your 2005 dancing income anyhow.
    Last edited by Melonie; 08-21-2005 at 12:38 PM.

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    God/dess montythegeek's Avatar
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    Default Re: start paying taxes now.. or backtrack???

    Remember to take into consideration that unless you pay all taxes the soon-to-be ex has leverage to say they are going to squeal on you to the IRS.

    Ex-spouses, former lovers, and pissed off family members are the major reporters of non-compliant tax reporters in the squealing-for-dollars game at the IRS.

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    Default Re: start paying taxes now.. or backtrack???

    You can start paying estimated taxes. Though you are entitled to file jointly, there is the possibility of filing separately. For example you earn say $10,000 in 2004, but he earns say $50,000, so your taxes would be at the minimal rate for filinig separately and his would be farther up there.) Generally it is more expensive to file separately unless something odd happens, as it often does with divorces. But check into it and do the math.

    If you do file separately, (some tax preparer help me here), then I believe because you paid NO tax in 2004, you do not owe estimated taxes for this year. BUT you do have to pay all the tax liability for 2005 by January 15, 2006 or get interest and penalties.

    And next year you need to file estimated taxes in one of 3 ways. That choice part is complicated and you must do the math again.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Banned Melonie's Avatar
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    Default Re: start paying taxes now.. or backtrack???

    Though you are entitled to file jointly, there is the possibility of filing separately. For example you earn say $10,000 in 2004, but he earns say $50,000, so your taxes would be at the minimal rate for filinig separately and his would be farther up there.
    This is exactly the reason that tax filing status concessions can be a major 'bargaining chip' in divorce related property settlement agreements. I'll reiterate my previous statement that, until sodapopgirl is absolutely sure what tax filing status will apply, it's impossible to accurately calculate the appropriate amount of estimted tax on her dancing earnings. Furthermore, overpayment of estimated tax on her dancing earnings may result in a tax refund which must then be split between herself and her soon-to-be ex - the functional equivalent of her handing him the cash.

    To elaborate on my earlier comment, she should definitely sit down with her attorney and try to get these tax matters officially settled BEFORE the 4th quarter estimated tax deadline of January 15th. IMHO not paying in estimated taxes on dancing income prior to January 15th is an acceptable risk, versus leveraging her negotiating position with her soon-to-be-ex. In regard to the possibility of her soon-to-be-ex ratting her out to the IRS, if an estimated tax payment IS made on January 15th it takes a lot of the 'wind' out of his sails compared to finishing tax year 2005 without paying any estimated taxes on dancing income.

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    God/dess threlayer's Avatar
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    Default Re: start paying taxes now.. or backtrack???

    The IRS does not set up rules for a couple splitting deductions, exemptions, or income when filing jointly. I believe it has rules for income when filing separately but not the other two.

    For example, if enough deductions make is more financially reasonable for only one to claim actual rather than the standard deduction, you have to decide which way to go as the IRS required for separate filing that both have to use the same method (unless I am out of date on this). Or at a more detailed level, how to split up deductions (like mortgage interest) if there is a big disparity in the marginal tax rate and the actual deduction method is selected -- eg percentage of income, half, or dividing the net tax savings in half, or however -- after the return with the most tax savings gets the deduction.

    (I'm only a tax preparer for myself and I only know most of my own tax situations.)
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Banned Melonie's Avatar
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    Default Re: start paying taxes now.. or backtrack???

    For example, if enough deductions make is more financially reasonable for only one to claim actual rather than the standard deduction, you have to decide which way to go as the IRS required for separate filing that both have to use the same method (unless I am out of date on this). Or at a more detailed level, how to split up deductions (like mortgage interest) if there is a big disparity in the marginal tax rate and the actual deduction method is selected -- eg percentage of income, half, or dividing the net tax savings in half, or however -- after the return with the most tax savings gets the deduction.
    Again, all of these things can serve as bargaining chips ... because divorce attorneys and/or family court judges and not the IRS will be the ones who make decisions in regard to what tax filing status husband and wife must use, who gets to claim what deductions, who gets a refund/pays in etc. Thus if the wife makes a unilateral cash payment towards estimated taxes, with these matters unresolved by divorce attorneys and/or a family court judge, she may in fact be handing a large portion of her estimated tax payment straight into her ex's tax refund !

    I've been there, done that, gotten screwed on income tax by my ex, and don't want to see other girls get screwed in the same manner by their ex's !

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    Default Re: start paying taxes now.. or backtrack???

    Just a couple of quick comments.

    1) You are not required to file a joint return, even though you may elect to. Separate filings do have issues of course that need addressing
    2) If you pay estimated taxes and only provide your tax ID number they will be credited to your account. So, if pending divorce, only pay with one tax ID number and don't share the amount with the ex if possible.
    3) The IRS will grant the tax credits for estimates to the person who claims them first - so timing is also important
    4) If the divorce can be finalized before 12/31 then you can file as single for 2005.

    5) You should pay your estimated taxes to protect you. The divorce side/family law side generally looks at fairness regardless of the games played by attornies.
    6) If you live in a Community Property State (CA, WA, etc.) you may want to consider your legal tax liabilities for your spouses income during the period of marriage. Can be worked around but certainly can be an issue.

    Regards,

    Dan
    Daniel D. Morris, CPA
    [email protected]

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