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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121338  
Subject: Re: NY State estimated tax help Date: 4/6/2011 12:10 AM
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A million thanks for your quick replies and help. I filled out the IT-201 to the best of my ability and calculated my NYAGI.

In the process, I realized a few more details that seem key to getting to the bottom of my confusion. You are correct that in 2010 I was only a part-year NYC resident; in 2011 I will be a full-time resident. For the last quarter of 2010 when I was in NYC and filing estimated taxes, I seem to have underestimated what I owed, and therefore owed a penalty on my 2010 return. (It appears that I owed the penalty to the federal gov.)


This seems odd. Where you live would have no impact on your federal estimated tax payment requirements. Perhaps you mean that prior to moving to NYC, you weren't self employed and didn't have to calculate estimated taxes.

1. It seems to me that I should be able to figure what I owe now for federal in 2011 based on what I should have paid, i.e. Line 18, "required payments" on Form 2210, given the Safe Harbor allowance (the amounts in Line 18 are approx. $1,130 for each quarter). Does that seem correct?

Federal estimates are easy to calculate using the worksheets for Form 1040-ES. You can choose the method that yields the lowest payment and can switch methods each quarter. There are also estimated tax calculators available that can make this task easier.

2. For NY State estimates, I want to make sure I understand what you're saying, Paxter: "If you know that you had much lower NY taxes in 2010 than you will have in 2011, the easy answer is to just use the 2010 taxes for your safe harbor amount." So, even though I was a part-year resident in 2010 and paid less than $150, I can still pay that each quarter of 2011 knowing that in actuality I owe more? It would be nice to keep more money myself throughout the year before 4/15/12.

I'm no longer sure that my earlier answer is correct. The instructions aren't clear with regard to taxpayers whose residency status changes. I don't have time to research the legislative language to determine whether your line 25 entry should be your actual amount from your 2010 IT-203 part-year residency return, whether it should be what your tax liability would have been as a full-year resident, or whether you should skip line 25.

Lastly, your answers to 1 and 2 may well solve everything for me. Just in case it's helpful, here's a snapshot of let's call it my "friend's" profile:

Freelance income: $50,500
Taxable interest income: about $2,700
SE health insurance: $3,400
Standard deduction
Other combined business expenses: $2,500
Rent: $1,110/mo.
Utilities: $100/mo.
Use 3% my 230 sq ft apartment for business use

Is there a ballpark estimated quarterly payment (federal and state) this person should expect? I ask because the individual's calculations (very likely flawed) are quite different from those provided by an accountant who was consulted, and we want to be Foolishly savvy about this.


Based on the numbers above, your federal estimated payments would be about $2700/quarter. Don't forget to include the SE tax in your estimated tax calculations. Your NYS/NYC estimated payments would be about $820/quarter.

Another issue to watch out for is the NYC-202 Unincorporated Business Tax. The last I looked at that tax, it kicks in at gross revenues in excess of $95K.

Ira
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