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Thread: Paying Quarterly

  1. #1
    AudreyLeigh
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    Default Paying Quarterly

    I was worried about having not paid quarterly... I thought when I DID pay my taxes I would be screwed with penalties and interest... all from what I read here on Dollar Den.

    I then spoke with a tax preparer who worked for the IRS for 15 years...

    She said I dont HAVE to pay quarterly as a sole proprieter (ind. contractor) She said that you have to pay quarterly if you have an LLC (which I dont)

    Im just interested because I seem to have been given false information here and wanted to point this out. Most people on here that talk about paying quarterly have an LLC and have to pay quarterly but for the ind contractor stripper we dont have to pay quarterly... its a good idea to do this but not a law...

  2. #2
    God/dess Deogol's Avatar
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    Default Re: Paying Quarterly

    Thanks for the tip.

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    Default Re: Paying Quarterly

    I beg to differ. I am not a CPA, but I know a thing or two about Federal income tax law and about the IRS

    I worked for many years doing federal income taxes as a volunteer in the IRS's Vounteer Income Tax Assistance (VITA) program. We did taxes free of charge, including E-filing for low income people, the elderly and military members. To work in the program we were trained every year for two weeks by current IRS agents in all aspects of the tax laws for that year.

    I have not done it for a few years so I don't know the percentages off the top of my head but anytime your amount withheld does not meet a certain percentage of the amount you owe in tax you have to make estimated payments to make up the difference or be subject to penalties and or fines for underwitholding.

    It did not matter what type of taxpayer you were, ind. contractor, LLC or even just a W-2 wage earner that might not have enough withholding from his/her W-2 job to cover extra income from, for example, substantial interest income reported VIA 1099's but the bank or whatever didn't take out witholdings and pushes the total income and total tax above the amount withheld from the W-2 job.

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    Member Z o e's Avatar
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    Default Re: Paying Quarterly

    I skipped two of my quarterly tax payments this year and made them up at the end of the year. I'll follow up with how it affected me when I find out.

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    Featured Member MadisonM's Avatar
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    Default Re: Paying Quarterly

    I didn't make any quarterly payments at all. This has been my first full year dancing, so I've never filed taxes as a dancer before, but I met with an accountant about 7 months ago, and she said that it would be a good idea for me to make estimated quarterly payments, so that I don't have to pay in a large amount of money all at once at tax time, but that it wasn't required for me to do so. I chose not to send in quarterly payments, because I'm going to have a lot of tax deductions (I spent a lot of money on clothes and makeup to start out this year), and therefore I shouldn't have to pay too much in.

    So basically, according to my accountant, who specializes in doing taxes for the self-employed, it is a good idea to send in quarterly payments if you are an independent contractor, but it isn't required.

  6. #6
    God/dess montythegeek's Avatar
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    Default Re: Paying Quarterly

    MAdison has the first year protection. The IRS differs fom the original posters position. http://www.irs.gov/businesses/small/...110413,00.html
    Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough through withholding or estimated tax payments, you may be charged a penalty. If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.

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    Banned Melonie's Avatar
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    Default Re: Paying Quarterly

    She said I dont HAVE to pay quarterly as a sole proprieter (ind. contractor)

    So basically, according to my accountant, who specializes in doing taxes for the self-employed, it is a good idea to send in quarterly payments if you are an independent contractor, but it isn't required.
    As Monty points out with official IRS regulations, there is a 'loophole' which dispenses with IRS penalties as long as the total amount of tax money withheld and/or paid in to the IRS THIS YEAR exceeds the amount of actual tax liability which was due LAST year. For girls who were students without significant amounts of income last year (2004 tax year) and have begun dancing this year for the first time (2005 tax year), then for a fact the IRS will not charge penalties and interest for failure to make quarterly estimated tax payments through 2005. However, we're now into the 2006 tax year, so for the balance of 2006 the 'loophole' will only protect you for the difference ... i.e. if you don't send in quarterly estimated tax payments through 2006 which add up to at least the amount of taxes you owed on your 2005 tax return, the IRS can hit you with penalties and interest on the difference.

    t did not matter what type of taxpayer you were, ind. contractor, LLC or even just a W-2 wage earner that might not have enough withholding from his/her W-2 job to cover extra income from, for example, substantial interest income reported VIA 1099's but the bank or whatever didn't take out witholdings and pushes the total income and total tax above the amount withheld from the W-2 job
    This is absolutely true. Even people with 'employee' jobs, where their employer withholds and makes the equivalent of estimated tax payments for them automatically on a weekly basis, may still be responsible for sending in quarterly estimated tax payments if they have additional sources of income besides their weekly paycheck i.e. stock dividends, CD/bank account/bond interest, capital gains from sale of stock or property, winning the lottery etc. The legal classification of the type of business i.e employee, IC, LLC has absolutely nothing to do with the obligation to pay quarterly estimated taxes on taxable income from whatever source. Of course, 'employees' have the option of increasing their weekly tax withholding through their employer's payroll system to in effect have their employer automatically make their estimated tax payments for them on a weekly basis (instead of having to cut a check and file a 1099-ES form themselves every three months)

    here's the IRS reg quote from Monty's link ...


    "Who Must Make Estimated Tax Payments?

    If you had a tax liability for 2004, you may have to pay estimated tax for 2005. You must pay estimated tax for 2005 if both of the following apply.

    1. You expect to owe at least $1000 in tax for 2005 after subtracting your withholding and credits.

    2. You expect your withholding and credits to be less than the smaller of;
    * 90% of the tax to be shown on your 2005 tax return, or
    * 100% of the tax shown on your 2004 tax return. <- Loophole

    However, if your 2004 adjusted gross income exceeded $150,000, or $75,000 if you will file a separate return from your spouse for the year 2005, then your tax withheld and credits must total 110% instead of 100% of your 2004 tax. Your 2004 tax return must cover all 12 months. For 2004, AGI is the amount shown on Form 1040, line 36; Form 1040A, line 22; and Form 1040EZ, line 4.

    Who Does Not Have To Pay Estimated Tax

    If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to take more tax out of your earnings. To do this, file a new Form W-4 with your employer.

    Estimated tax not required
    You do not have to pay estimated tax for 2005 if you meet all three of the following conditions.

    1. You have no tax liability for 2004 <- Loophole
    2. You were a US citizen or resident for the whole year
    3. Your 2004 tax year covered a 12 month period

    You had no tax liability for 2004 if your total tax was zero or you did not have to file an income tax return. For additional information on how to figure your estimated tax, refer to Publication 505, Tax Withholding and Estimated Tax."


    I would point out that since it is now January 2006, the references to 2004 in the link now correspond to 2005, and references to 2005 in the link now refer to 2006 in regard to making estimated tax payments in April, June, Sept. 2006 and January 2007 i.e. the 2006 tax year.

    Im just interested because I seem to have been given false information here and wanted to point this out
    It would indeed appear that you were given false information, but by your paid tax preparer not by 'amateur' members of SW ! Admittedly there are more than a few differences of opinion among professional tax preparers in regard to what sort of procedures and deductions can be 'gotten away with'. Ultimately, the IRS decides these issues with consistency as a result of audits, and if you are audited and the IRS decides against you it will be you and not your paid tax preparer who is responsible for the consequences.
    ~
    Last edited by Melonie; 01-22-2006 at 11:03 AM.

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    Default Re: Paying Quarterly

    I would like to say that this worried me as well, but after I sat down to a CPA, I owed way less in taxes than $1000. I also only worked for a very short period of time.

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