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July 15th, 2007, 09:37 PM #1Estimated taxes
Just getting around to doing my taxes for last year (hey, been busy with my affiliate businesses ) and I'm seeing those dreaded words "estimated taxes" which, for the first time seem as though they might be relevant??
If I should happen to start making gobs of money (non-taxed affiliate income, that is) should I start paying estimated taxes? I know I probably need a tax advisor for the specifics but just wanted to get an idea from some of you that have been through this.
Thanks in advance!
July 15th, 2007, 10:43 PM #2
If you want to avoid penalties and interest, you definitely need to pay estimated taxes. I think they give you a break the first year, but after that you have penalties if you don't pay enough estimated taxes. The specifics vary depending on a number of different factors, so definitely consult a tax advisor or brush up on the rules yourself.
July 15th, 2007, 11:27 PM #3
I wish we could calculate, submit, and receive 'estimated refunds' instead. I heard there are people that actually get refunds... LOL! UGH!
July 16th, 2007, 05:55 AM #4
I decide when the pigs fly!
- Join Date
- January 18th, 2005
- New York, USA
I think I'd ask an accountant at what dollar amount you should start paying estimated quarterly. I didn't pay it for years when my sites were considered a hobby that generated income but my income didn't exceed $5K/year.
When I started doing this full-time I started paying estimated quarterly. I pay a little bit in Q1, Q2 and Q3. When my big commission checks from November arrive in December I write a big check to the IRS for Q4 and that's usually more than sufficient to cover my annual taxes. The IRS doesn't seem to mind that I do this.
July 16th, 2007, 06:30 AM #5
Similar to Rhea, my accountant has it set up for me to pay less in Q1 and Q2 than in Q3 and Q4. My travel commissions are largest from this point of the year (summer) on forward. As long as an "uneven" trend of income can be documented, the IRS will allow it.
Unfortunately, the portion of income from "self employment" is subject to both portions of the Social Security tax. That, in effect, increases your "tax bracket" because you are essentially the employer AND the employee.
In a way it is really nice to be paying estimated taxes...because that means you are earning $$$from this business.
July 16th, 2007, 06:47 AM #6
I forget what the threshold is but if you have to pay over a certain amount at the end of the year, you should be paying quarterly estimated taxes. My accountant sets up my estimated payments based on the previous year's income and, 2 weeks before the estimated is due, we look at my earnings and make the necessary adjustments since my income fluctuates quarter to quarter (so far the fluctuations have been increasing )
July 16th, 2007, 06:48 AM #7From Smart Money
In most cases, you must make estimated tax payments if you expect to owe $1,000 or more in taxes for the year - over and above the amount withheld from your wages.
If your prior year adjusted gross income was $150,000 or less, then you can avoid a penalty if you pay either 90 percent of this year's income tax liability or 100 percent of your income tax liability from last year (dividing what you paid last year into four quarterly payments). This rule helps if you have a big spike in income one year, say because you sell an investment for a huge gain or win the lottery. If wage withholding for the year equals the amount of tax you owed in the previous year, then you wouldn't need to pay estimated taxes no matter how much extra tax you owe on your windfall.
If your prior year adjusted gross income was greater than $150,000, then you must pay either 90 percent of this year's income tax liability or 110 percent of last year's income tax liability.
Payments are due on April 15, June 15, September 15 and January 15 of the following year. You can skip the final payment if you will file your return and pay all the tax due by February 1.
July 16th, 2007, 08:11 AM #8
Should be no surprises. Estimated taxes are based on your previous year so you know the basis upon which you are starting. If you filed extensions last year you should have paid in at least what you actually owed.
July 16th, 2007, 08:48 AM #9
Thanks everyone for the good information. Fortunately, my taxes for next year seem to be increasing quickly and steadily Wow, never thought I'd say that
Guess it's time to hire an accountant. Any good recommendations in the north-west Atlanta area (ie. 20 miles outside the perimeter for you locals)?
July 16th, 2007, 09:19 AM #10
Anne: You don't want too much of a refund. You're giving an interest free loan to the government if you do.
And you and I both know that you can do better things with the money than they do, right? (No matter WHO's in office...)
This is the first year I will be filing quarterly, actually.
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