Hi,DW hasn't worked for a couple of years, and is now abusiness real-estate agent (ie, she represents peoplebuying or selling businesses, not houses orcommercial property) and she's closed her first coupleof deals within the past month. I downloaded theform 1040-ES and it is somewhat unclear on thepoint: "if you had no tax liability in 2002, you don'thave to pay estimated tax".In 2002, DW had no wage or business income herself, butwe did have income from investments held jointly. Did DWhave a tax liability by their definition?So, the question is does she have to file estimated taxfor 2003 immediately, or can we go ahead and pay her partof our taxes without penalty when we file our 2003 return?Thanks.--Foobarista
Your requirement for estimated taxes, if you are filing a joint return, is based on your joint income tax liability.The amount of tax you have to pay by withholding and/or estimates is the lesser of - 90% of this year's tax or - 100% of last year's tax (110% if your AGI was over $150,000 last year)It sounds like she's self-employed in the real estae business (most of them are), so remember that the estimates have to cover the self-employment tax, as well as the regular income tax.This is a new venture for her. I hope you've got a system for tracking her business expenses. (The income is easy; the agency will be giving her a 1099-MISC for that).Good luck to both of you.WRA
I hope you've got a system for tracking her business expenses. (The income is easy; the agency will be giving her a 1099-MISC for that).You need to keep meticulous records of both income and expenses. Aside from the fact that you won't know if the 1099 is correct if you don't have your own records, not all income is required to be reported on 1099's.Phil
You said: I downloaded theform 1040-ES and it is somewhat unclear on thepoint: "if you had no tax liability in 2002, you don'thave to pay estimated tax".STOP!! the 1040ES for 2003 hasn't been updated for the May 5 tax law changes. There isn't even a Draft Copy available. Publication 505 is just as much out of date. If you want to estimate your taxes for year 2003 most of the estimaters on the web haven't got the latest rates either. The clue is whether they use double the Single Exemption for MJF or ask for pre May 5 LTCGs.2 that do work are H & R Block Tax Outlook Calculator for 2003 and Edcosoft.com s QITC calculator.For purposes of Estimated Taxes you must consider all your income and withholding and estimated payments as MFJ, that is, the total for both of you for last year and this year.In your case if your AGI in 2002 was less then $150K increase your withholding to equal your total tax last year. If over $150K the amount is 110% of last year's total tax. If your salary is increasing it should be enough allready, unless they reduced your withholding due to the tax law change. This will prevent any penalties and you can figure her taxes next April, including SE tax. DO NOT pay an estimate to make up this difference or you will have to complete the entire form 2210 and Schedule AI to justify why you didn't pay it sooner. EdH & R Block and Edcosoft.com/QITC
Thanks for the replies. I upped my withholding to come to 90% of lastyear's tax (I made more last year because the startup I work at put uson half-salary until June - we got funded and are now back to normalsalary), and DW's income, while still unknown, is enough that we'llprobably end up making not much less than we made last year.IMO, this is the most informative board in TMF. Thanks!--Foobarista
Don't forget DW's SE tax on her commissions, about 15.3% of net that counts as part of 90% of this year's tax liability for withholding and estimated tax purposes.Bill
The safe harbor is 100% of last year's tax, not 90%. I don't think you can estimate this year's tax correctly due to spouse SE tax on SE Earnings and her business may "take off". I suggest you increase withholding again to cover the other 10% of last year's tax, or use an accurate estimater closer to the end of the year to increase it, or prepare to pay a penalty. DON'T pay an estimate. Ed
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