Results 1 to 9 of 9

Thread: Taxes - Please Help

  1. #1
    Member ShannonChicago's Avatar
    Joined
    Mar 2005
    Location
    Chicago
    Posts
    58
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Taxes - Please Help

    Hi All,
    FIGURED IT OUT. i am officially BROKE.
    Last edited by ShannonChicago; 03-23-2006 at 12:06 AM.

  2. #2
    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: Taxes - Please Help

    well, believe it or not, being broke beats being 'in the hole', as in the IRS sending you a 'deficiency notice' to pay taxes on money that they 'estimate' you actually earned !

  3. #3
    Member JoeyJones's Avatar
    Joined
    Mar 2006
    Location
    ATL
    Posts
    30
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: Taxes - Please Help

    I'm broke too! I wanted to get an extension to pay my tax bill. It was suggested that I put it on my credit card because the rates *cough* are much lower.

  4. #4
    God/dess Emily's Avatar
    Joined
    Feb 2003
    Location
    Las Vegas
    Posts
    11,302
    Thanks
    4
    Thanked 143 Times in 72 Posts

    Default Re: Taxes - Please Help

    filing an extension doesn't mean you get longer to pay, just file.....you still have to send in a check on Apr 15th for what you think you owe. And don't be wrong!

  5. #5
    God/dess FrustratedBunny's Avatar
    Joined
    Jan 2006
    Location
    New Orleans, LA
    Posts
    2,457
    Thanks
    0
    Thanked 4 Times in 4 Posts

    Default Re: Taxes - Please Help

    If you get behind in tax payments it's hard to catch up. I owe a ton of money. Ouch. Whatever you don't pay by the 15th they charge 5% interest on each month up to a max of 25% from what I understand. Hopefully I won't have to pay any interest and will come up with the money.

    What I did learn however is that if you skip estimated quarterly payments but do in fact pay at least what you payed in the year before in estimates by the end of the year the penalty for the late quarterly payements aren't really that bad. I paid 3 payments by the end of the year (2 late) and the extra was only $100.

  6. #6
    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: Taxes - Please Help

    for the record, the estimated tax penalty 'exemption' says that if you paid in estimated taxes THIS year in an amount equal to the total taxes you actually owed on income earned in the PREVIOUS year, then no additional penalties will be charged.

    This is a useful 'exemption' for girls who have just started dancing, and who were students or working at low paying hourly jobs in the previous year thus the previous year's actual taxes owed were small or zero. However it only helps once.

  7. #7
    God/dess FrustratedBunny's Avatar
    Joined
    Jan 2006
    Location
    New Orleans, LA
    Posts
    2,457
    Thanks
    0
    Thanked 4 Times in 4 Posts

    Default Re: Taxes - Please Help

    Well whatever kind of thing had to do with mine I don't think was the estimated tax exemption. I'm not sure. I know I had to pay $100 in extra interest or something but there was no penalty because I caught up the estimates. My CPA also told me not to worry as much about paying my first quarterly estimate on time as getting the taxes for 2005 paid by the deadline if I can and then catch up the quarterly estimate. I basically paid my 2nd, 3rd, and 4th quarter estimates all when the 4th quarter one was due for 2005 and had the $100 penalty. But it wasn't enough because I paid estimates based on my prior year income which was lower and had more deductions and now I owe an additional $6600 for 2005 taxes by April 15th (well, actually 17th).

  8. #8
    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: Taxes - Please Help

    ^^^ you're right that there is a big difference between 'penalties' charged for under-payment of estimated taxes and interest due on 'late' estimated tax payments. The 'penalty' is roughly meant to be a 'fine' i.e. a punitive measure for failure to pay estimated taxes as required by law. The first year 'exemption' applies only to this 'fine' being leveed.

    Even though most US taxpayers are of a mindset that their tax payment is due once per year on April 15th, in fact estimated tax payments are due every pay period (usually weekly, bi-weekly or monthly) for employees on the money they earned during that pay period. Of course, employees' estimated tax payments are withheld from their paychecks and sent in to the IRS by their employer so most never think about this issue.

    For independent contractors, estimated tax payments are due every three months on the money they earned during that three months. If no estimated tax payment is sent in, or if the estimated tax payment that was sent in is insufficient to cover the taxes due on that three month's income, the IRS basically lends the person the balance due and charges a healthy rate of interest. As you point out, there is no 'exemption' to paying this interest. Thus if an independent contractor neglects to make estimated tax payments in say, April, June, and September, and pays in the entire amount of estimated taxes due with one large January estimated tax payment, the IRS will still charge 9 months interest on the money actually due in April, 7 months interest on the money actually due in June, and four months interest on the money actually due in September.

  9. #9
    God/dess FrustratedBunny's Avatar
    Joined
    Jan 2006
    Location
    New Orleans, LA
    Posts
    2,457
    Thanks
    0
    Thanked 4 Times in 4 Posts

    Default Re: Taxes - Please Help

    Well, here is my scenario. I paid my 1st quarter estimated payment on time April of 2005. Then I didn't pay my June 2005 and September 2005 until January of 2006 but I caught it all up. The extra I have to pay for paying it late was only $100 which can't be interest because it would be much more than that, so it must simply be penalty. 2005 is my second full year working as an IC so these payments were based on my 2004 earnings. As it turned out I owed more for 2005 than 2004 so even though I caught up the payments to what I would have owed based on 2004 earnings I need to pay still more for 2005 by April 15, 2006. Now if I don't come up with all of that money by April 15, 2006 then I get 5% per month interest charged on the difference. Not to mention I still have to pay my first quarter estimate for 2006 by April 15 also which I won't have. I'm just hoping I can come up with the rest of the 2005 taxes by April 15. It's going to be hard and maybe not even possible. I can't imagine if I just hadn't paid taxes for the past two years and had to catch up. That would be pretty impossible. I guess that is why people just lose their homes or cars or whatever to the IRS.

Similar Threads

  1. Taxes?
    By misselise07 in forum Other Work
    Replies: 21
    Last Post: 01-10-2011, 01:00 PM
  2. taxes
    By electrifiedlove in forum Other Work
    Replies: 1
    Last Post: 11-17-2010, 12:12 AM
  3. Replies: 6
    Last Post: 05-01-2008, 01:07 PM
  4. Taxes
    By exotica268 in forum Dollar Den
    Replies: 14
    Last Post: 03-07-2008, 04:14 PM
  5. Taxes
    By chevere in forum Dollar Den
    Replies: 2
    Last Post: 12-28-2005, 08:53 AM

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
  •