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Author: ElleRB CAPS All Star Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120809  
Subject: NY State estimated tax help Date: 4/4/2011 8:49 PM
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Hello,

I am a young, novice investor who just moved to NYC. As I am new to being a self-employed 1099 worker and filing quarterly taxes, I would greatly appreciate help with the estimated tax payment I need to submit by April 18! Background: I get paid $50,000/year with obviously nothing withheld.

I'm running into two stumbling blocks that I can't seem to answer via Google search:

NY STATE (Form IT-2105-I)

1. Line 1, "amount of NY adjusted gross income." How do I calculate this? If I will solely be working in NY in 2011, is this amount simply my AGI that I estimated ($45,900)?

2. Line 25, "110% of personal income tax shown on 2010 income tax return," and Line 26, "the lesser of lines 24/25," which is the required annual payment. For me, if I calculated correctly, Line 25 is far, far less; so why did I have to fill out this entire form w/ all the calculations instead of just calculating 110% of my 2010 income tax? Perhaps I am using the wrong number; is the personal income tax "total NY State tax" (line 50) and "Total NYC tax" (line 55) of the state return (IT-203)?

Thank you.
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Author: Patzer Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 112971 of 120809
Subject: Re: NY State estimated tax help Date: 4/4/2011 9:41 PM
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1. Line 1, "amount of NY adjusted gross income." How do I calculate this? If I will solely be working in NY in 2011, is this amount simply my AGI that I estimated ($45,900)?

NY AGI is federal AGI with some state-specific adjustments. On the subtraction side, taxable refunds of state income tax and social security are excluded from NY AGI. On the addition side, tax-exempt interest from bonds issued by non-NY entities is taxable on the NY side.

See NY Form IT-201 and its instructions for the full list of adjustments that turn federal AGI into NY AGI.

2. Line 25, "110% of personal income tax shown on 2010 income tax return," and Line 26, "the lesser of lines 24/25," which is the required annual payment. For me, if I calculated correctly, Line 25 is far, far less; so why did I have to fill out this entire form w/ all the calculations instead of just calculating 110% of my 2010 income tax?

You're doing a worksheet that estimates your 2011 NY tax return. This worksheet is not filed. The actual IT-2105 only has your identifying information and how much you're paying. 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. You will still have the issue of paying the full amount of tax for 2011; it's just that you can hang onto much of the cash till April 2012 because you have a low safe harbor amount based on low 2010 taxes.

Perhaps I am using the wrong number; is the personal income tax "total NY State tax" (line 50) and "Total NYC tax" (line 55) of the state return (IT-203)?

IT-203 is the nonresident/part year resident form. Presumably you were a part-year resident in 2010, and that is why your 2010 taxes are much lower than your estimate of 2011 taxes. If you stay in NY long term, and your income is fairly stable, expect the 2011 income tax and the 2012 estimated tax to be closer than the numbers you're seeing now for 2010 and estimated 2011.

Patzer

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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: 112972 of 120809
Subject: Re: NY State estimated tax help Date: 4/4/2011 9:59 PM
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I am a young, novice investor who just moved to NYC. As I am new to being a self-employed 1099 worker and filing quarterly taxes, I would greatly appreciate help with the estimated tax payment I need to submit by April 18! Background: I get paid $50,000/year with obviously nothing withheld.

I'm running into two stumbling blocks that I can't seem to answer via Google search:

NY STATE (Form IT-2105-I)

1. Line 1, "amount of NY adjusted gross income." How do I calculate this? If I will solely be working in NY in 2011, is this amount simply my AGI that I estimated ($45,900)?


Get a copy of the 2010 NY IT-201 with instructions and complete it using your estimates of your 2011 income. NY starts with your federal AGI and then makes adjustments.

2. Line 25, "110% of personal income tax shown on 2010 income tax return," and Line 26, "the lesser of lines 24/25," which is the required annual payment. For me, if I calculated correctly, Line 25 is far, far less; so why did I have to fill out this entire form w/ all the calculations instead of just calculating 110% of my 2010 income tax? Perhaps I am using the wrong number; is the personal income tax "total NY State tax" (line 50) and "Total NYC tax" (line 55) of the state return (IT-203)?

Line 25 is 100% of the tax shown on your 2010 return. It's only 110% if your 2010 AGI exceeds 150K (75K MFS). You enter your 2010 NYS tax (IT-203, line 50) in the first column, your 2010 NYC tax (IT-203, line 52c) in the second column, and your 2010 Yonkers tax (IT-203, line 53 + line 54) in the third column.

Whether your projected 2011 income tax is more than your 2010 income tax depends entirely on the facts of your income situation. To the extent that some of your 2010 income was not taxable to NYS/NYC and all of it is taxable in 2011, and your federal income is relatively constant, then line 25 will be much less than line 24.

Ira

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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: 112973 of 120809
Subject: Re: NY State estimated tax help Date: 4/4/2011 10:06 PM
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NY AGI is federal AGI with some state-specific adjustments. On the subtraction side, taxable refunds of state income tax and social security are excluded from NY AGI. On the addition side, tax-exempt interest from bonds issued by non-NY entities is taxable on the NY side.

Don't forget the other big subtractions -- interest on US government debt, NYS and local government pensions (not likely to be relevant to OP).

Ira

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Author: ElleRB CAPS All Star Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 112997 of 120809
Subject: Re: NY State estimated tax help Date: 4/5/2011 10:24 PM
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Patzer and Ira,

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.)

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?

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.

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.

Again, countless thanks.

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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: 112998 of 120809
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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