Quarterly Taxes

[dentoid]

Switched over to a bonus schedule mid-last year.  Income significantly increased in 2016 from 2015 and owed $13,000 in taxes for 2016.  Trying to figure out quarterly taxes for 2017.  TurboTax estimated about $9,000/quarter, but after completing the 1040-ES, would only have to pay about $2,000 to avoid penalties.  Would you recommend to pay $9,000/quarter with hopefully no additional taxes due next year or $2,000/quarter in order to avoid penalties but acknowledging a significant amount due next April? Or the SafeHarbor 110% percent calculation of the 2016 amount owned ($13,000)?

Still owe $300K in student loans, and hoping to purchase a practice this year - were told banks like to see 40-60K in savings to get approval for practice loan.

 

 

[Hatton]

I personally do the 110% safe  harbor.  Yes it is a psychological pain to have to pay but it happens.  Years when you have unexpected investment income or a bonus the safe harbor keeps you from paying penalties.  It also frequently means the next year you will not owe extra on 4/15.  Sometimes it will cover your first estimate if your income dropped.

[The White Coat Investor]

If all your income is self-employed, the easiest thing to do is multiply last years's tax bill by 27.5% and mail that in each quarter. That keeps you in the safe harbor. If come January you're way ahead on what you'll owe, you can make that last estimated payment a little smaller.
If you're also paying taxes via wage withholding, then it gets a lot more complicated.

Bear in mind your withheld taxes + estimated taxes may still be MUCH less than you actually owe if your income is rising.

[jfoxcpacfp]

The White Coat Investor wrote:

Bear in mind your withheld taxes + estimated taxes may still be MUCH less than you actually owe if your income is rising.

Click to expand...

Also bear in mind that the toughest estimate to make is April 15 because you are also dealing with your balance due. Plan ahead - if you're late on this one, your penalty will be the highest because it's the first one due.

[golesdds]

I have a unique case that I'm looking for guidance on.

I'm a military dentist and started moonlighting as a 1099 in December 2016. I didn't have to file any of my 1099 income for 2016 because it was less than $1000.

I deployed at the end of January 2017 and came back at the end of April and started moonlighting again. I get paid on collections so I was still receiving paychecks while deployed while we got reimbursed from insurance, however they were much smaller. I didn't have internet where I was deployed and I didn't submit my quarterly taxes for April 18. However, it looks like on the IRS website I can get an exception to paying a penalty since I was deployed and missed the first quarterly payment. I just don't know how to submit the exception to the IRS and when to do it. I know you have to fill out a Form 2210 if you're supposed to have a penalty, or you can not submit it and the IRS will figure out the penalty for you.

Also, I'm trying to figure how much I should pay for my quarterly taxes. Being military, I was actually refunded ~$4,500 for 2016 since it was all W-2 income and had a baby. I suspect I'll make $25-30k from my 1099 job in addition to my military salary.

My wife did a 1099 job a few years ago and paid $24k on $80k of income (33%!!). The tax center on base said just take 15% of my expected 1099 income and then submit 1/4 of it each quarter. I don't trust that after what my wife paid with her 1099 job a few years back.

Thanks for all your help, WCI is amazing!

[The White Coat Investor]

golesdds wrote:

I have a unique case that I’m looking for guidance on.

I’m a military dentist and started moonlighting as a 1099 in December 2016. I didn’t have to file any of my 1099 income for 2016 because it was less than $1000.

I deployed at the end of January 2017 and came back at the end of April and started moonlighting again. I get paid on collections so I was still receiving paychecks while deployed while we got reimbursed from insurance, however they were much smaller. I didn’t have internet where I was deployed and I didn’t submit my quarterly taxes for April 18. However, it looks like on the IRS website I can get an exception to paying a penalty since I was deployed and missed the first quarterly payment. I just don’t know how to submit the exception to the IRS and when to do it. I know you have to fill out a Form 2210 if you’re supposed to have a penalty, or you can not submit it and the IRS will figure out the penalty for you.

Also, I’m trying to figure how much I should pay for my quarterly taxes. Being military, I was actually refunded ~$4,500 for 2016 since it was all W-2 income and had a baby. I suspect I’ll make $25-30k from my 1099 job in addition to my military salary.

My wife did a 1099 job a few years ago and paid $24k on $80k of income (33%!!). The tax center on base said just take 15% of my expected 1099 income and then submit 1/4 of it each quarter. I don’t trust that after what my wife paid with her 1099 job a few years back.

Thanks for all your help, WCI is amazing!

Click to expand...

I'd just send a letter in explaining your exception and then not pay the penalty.

If you don't owe taxes, you don't have to make quarterly payments. If you do owe taxes, you can simply stay in the safe harbor and adjust it all up in April.

If you're really worried, just pay the minimum safe harbor amount.

[jfoxcpacfp]

golesdds wrote:

I just don’t know how to submit the exception to the IRS and when to do it. I know you have to fill out a Form 2210 if you’re supposed to have a penalty, or you can not submit it and the IRS will figure out the penalty for you.

Also, I’m trying to figure how much I should pay for my quarterly taxes. Being military, I was actually refunded ~$4,500 for 2016 since it was all W-2 income and had a baby. I suspect I’ll make $25-30k from my 1099 job in addition to my military salary.

My wife did a 1099 job a few years ago and paid $24k on $80k of income (33%!!). The tax center on base said just take 15% of my expected 1099 income and then submit 1/4 of it each quarter. I don’t trust that after what my wife paid with her 1099 job a few years back.

Thanks for all your help, WCI is amazing!

Click to expand...

These 2 posts will help you:

• How do I figure taxes for a side business?


• How to get out of a tax penalty

Basically, depending upon whether your state assesses income taxes or not, I'd set aside 1/3 (no tax state) to 40% (tax state) as an estimated amount to pay in estimates. It won't hurt to go ahead and send in your first estimate, as you'll get credited for the overpayment when you file your taxes next year, and the first estimate is the most important. Regardless, it doesn't appear that you'll be subject to enough penalty to report, given the facts.