Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Author: JoserFool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121351  
Subject: Estimated Tax payments/Penalties Date: 12/20/1998 8:37 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
I married earlier this year. Unfortunately I did not change my wife or own tax withholdings. Last year combined we with held $17,622 and when all was said and done we paid a total of $17,514 tax liability. This year I have estimated that we will have had $17,341 with held but will end up paying either $20400 or possibly up to about $27,000 if I sell some stock before the years end. IF I understand the IRS rules right if we had withheld at least $17,514 (last years tax liability) we wouldn't have to worry about quarterly estimated tax payment or a penalty...right?
We would just pay the $4000+ we owe in April..right? Is there anything we can do before hand to increase what is withehld this year? Can we pay the quarterly estimate by January 15 and not have to worry about paying the other 3 quarterly payements? Is the penalty sever enough where I should hold off selling my stock this year? We can I find the formula for the penalty? I have the basic version of turbo tax and it didn't have the penalty formula. Thanks in advance for any help you could give.
Print the post Back To Top
Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7411 of 121351
Subject: Re: Estimated Tax payments/Penalties Date: 12/20/1998 9:42 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
[[ I married earlier this year. ]]

Congratulations!!!

[[Unfortunately I did not change my wife or own tax
withholdings.]]

Oops...owch...

[[ Last year combined we with held $17,622 and when all was said
and done we paid a total of $17,514 tax liability.]]

I'm not sure I understand what you are telling me here. Just from the words and the numbers, it appears that your total tax liability amounted to $17,514, and you had $17,622 in whithholding. Which netted you a refund of $108. So that's the assumption that I'll use to respond to your question. If this assumption is not correct, quit reading now and give me more detail on your 1997 total tax liability and withholding.

In fact, it might be helpful for you to read my post on "estimated taxes" in the Taxes FAQ area. In fact, we discuss the estimated tax issue in much detail in The Motley Fool Investment Tax Guide. It may be well worth your reading. But let's move on.

[[ This year I have estimated that
we will have had $17,341 with held but will end up paying either $20400 or
possibly up to about $27,000 if I sell some stock before the years end. IF I
understand the IRS rules right if we had withheld at least $17,514 (last years tax
liability) we wouldn't have to worry about quarterly estimated tax payment or a
penalty...right?]]

Right...and it may not be too late. If at all possible, try to get that extra withholding in your final December paycheck. Somehow. Someway. Anyway that you can. If you can get your 1998 withholding up to the appropriate level, you'll not have to worry about making any estimated tax payments, and can pay any balance due on April 15th without any penalty.

[[ We would just pay the $4000+ we owe in April..right?]]

That's right...IF you were able to get your withholding to the appropriate level.

[[ Is there anything we can
do before hand to increase what is withehld this year?]]

Well...RUN, don't walk to your payroll people ASAP and see if there is any additional withholding taxes that you can get paid in before the end of the year. Claim zero exemptions...or even have an additional $500 in federal withholding taken on your final paycheck. Anything that you can do to get to the appropriate level.

[[ Can we pay the quarterly
estimate by January 15 and not have to worry about paying the other 3 quarterly
payements?]]

Nope. If some of the gains that caused the increase in tax happened in the first 3 quarters, and your withholding isn't enough to get you into the "safe harbor" area, you'll get hit with an underpayment penalty based upon the estimated taxes that you should have paid in the prior 3 quarters.

[[ Is the penalty sever enough where I should hold off selling my stock
this year?]]

Nope. I certainly wouldn't think so. The taxes are the main issues. Your total penalty on a balance due of about $4k would be (in the worst case) somewhere around $150.

[[ We can I find the formula for the penalty? I have the basic version of
turbo tax and it didn't have the penalty formula. Thanks in advance for any help
you could give.]]

Sure...you can read my post on estimated taxes in the Taxes FAQ area. I also have a post in the Taxes FAQ area regarding penalties and how they are assessed and abated. You can also read IRS Publication 505 for more details. And, you can check out IRS Form 2210 and the instructions to see exactly how the form works.

TMF Taxes
Roy

Want to learn more about taxes and investing? Then we have a deal for you!! The Motley Fool Investment Tax Guide is now available through Fool Mart. Be the first one on your block to own this masterpiece. There is still time available to do that tax planning (and tax saving) before the end of the year. So just click on this link (http://www.foolmart.com/market/product.asp?pfid=MF+013+I) to read more about this amazing collection of tax information. (Apologies for the shameless plug…but it is a pretty good book…if I do say so myself). In addition, if you would like to visit the Taxes FAQ (Frequently Asked Questions) area, click on http://www.fool.com/school/taxes/taxes.htm and you'll be right at the home page. Pay special attention to the "archives" section. Check it out. Finally, if you need to get to the IRS web site, click on http://www.irs.ustreas.gov to go directly there.


Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: JoserFool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7428 of 121351
Subject: Re: Estimated Tax payments/Penalties Date: 12/21/1998 2:53 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Unfortunatley even by running to payroll I missed their cut-off date by 1 day! My wife's employer could not say if they could make the change in time either. The stock I was considering selling is my company stock..I just called them and asked if there was a way to withhold federal taxes and to my surprise...they can if they fax me a form and I fax it back to them. Is there any reason you know of that this withheld tax (31% of my proceeds of the stock sale) wouldn't count the same as the normal federal tax withheld from our paychecks??? In other words if I made a $10,000 gain on the stock sale I think they will withold $3100. I would then add ths $3100 to the $17300 withheld from our paychecks to come up with $20,400 this year. Since my wife and I paid $17514 in taxes last year we would be exempt from paying a penalty and not required to file estimated payments, correct??
Thanks again for your help...I am strongly considering buying your tax guide so that come next december i'm not in scramble mode.

Print the post Back To Top
Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7445 of 121351
Subject: Re: Estimated Tax payments/Penalties Date: 12/21/1998 7:36 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
[[ Unfortunatley even by running to payroll I missed their cut-off date by 1 day!]]

Bummer...

[[ My wife's employer could not say if they could make the change in time either.]]

Double (potential) bummer...

[[ The stock I was considering selling is my company stock..I just called them and
asked if there was a way to withhold federal taxes and to my surprise...they can
if they fax me a form and I fax it back to them. Is there any reason you know of
that this withheld tax (31% of my proceeds of the stock sale) wouldn't count the
same as the normal federal tax withheld from our paychecks???]]

Withholding is withholding. Doesn't matter where it comes from. I'm a little surprised that your company can do this. I can only surmize that the shares in question are part of your "discount" or other stock option program. That being the case, remember that only the "discount" may be taken into income, and the associated withholding might not be enough to get you covered. So make sure that you and your benefits people are all on the same page and verse with respect to this transaction. It'd be a shame if you got surprised...especially this late in the game.

[[ In other words
if I made a $10,000 gain on the stock sale I think they will withold $3100.]]

I'm not sure. And THAT is specifically what you need to find out. Don't guess at it. Find out specifically. I don't know. So ask THEM!!!

[[ would then add ths $3100 to the $17300 withheld from our paychecks to come
up with $20,400 this year.]]

Again, I'm guessing that the withholding will come from your option or discount program. So it will be reflected on your W-2 form...as will the withholding. Which would be just fine...assuming it is enough to cover.

[[ Since my wife and I paid $17514 in taxes last year
we would be exempt from paying a penalty and not required to file estimated
payments, correct??]]

Assuming that your computations are right, your assumptions would be correct.

[[ Thanks again for your help...I am strongly considering buying your tax guide so
that come next december i'm not in scramble mode.]]

Good idea. Tax planning is a year round issue. Not just the last two weeks of the year. I'm sure that you'll find at least ONE tip in there that will save you the cost of the book in taxes. And, it'll be a nice stocking stuffer.

Let me know how it all works out...
TMF Taxes
Roy

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Advertisement