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Author: ramblinman2 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120826  
Subject: Sabbatical without pay? Date: 1/22/1999 4:51 PM
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I hope to take a few years away from the
"hub bub" of 9 to 5. My question to any of
you experienced "Fools" is about how one
should file with no other income than an
occasional sale of stock for annual income.
I was reading the Motley's Tax Guide and
stumbled on the estimated quarterly requirements
for anyone whose estimated withheld taxes don't
repesent at least 90% of the taxes they owe.
Do retired persons with no other income have
to file quarterly? What do you think Fools?

ramblinman
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Author: vargaj Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8727 of 120826
Subject: Re: Sabbatical without pay? Date: 1/22/1999 5:02 PM
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Yup: My father has been retired for about 20 years now. Living off SS, capital gains, dividends and interest. He pays the IRS and NJ taxes quarterly. I don't think there's any other way other than payoing all up front in the first quarter.

Joe Varga

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Author: vargaj Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8728 of 120826
Subject: Re: Sabbatical without pay? Date: 1/22/1999 5:08 PM
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PS: I don't know how old ypu are or what your resources are, but do you have medical insurance? One heart attack or one bout with cancer, even if you survive, could wipe out your nest egg, and you may become uninsurable thereafter. I would not take any kind of leave without some kind of medical coverage.
And if you haven't checked it out, to go out on the street to get it can be very expensive, almost as much as a mortgage would cost.

Good luck

Joe Varga

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Author: ramblinman2 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8730 of 120826
Subject: Re: Sabbatical without pay? Date: 1/22/1999 5:14 PM
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Hey Joe,
Thanks for the words of advice, especially
about the medical. One other question arises.
If I don't know how much security I'll liquidate
and for what kind of capital gain how the heck
am I supposed to estimate for Uncle Sam?

ramblinman

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Author: WilliamLipp Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8734 of 120826
Subject: Re: Sabbatical without pay? Date: 1/22/1999 5:38 PM
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ramblinman2 Date: 1/22/99 5:14 PM Number: 8730
If I don't know how much security I'll liquidate and for what kind of capital gain how the heck am I supposed to estimate for Uncle Sam?

You don't actually owe the estimated tax payment until after the quarter is over, so you are supposed to keep track quarterly. An alternative that costs a bit but is less hassle is to just be sure you have paid 105% of what you owed the previous year. If that turns out to be too much when you do the taxes, you can just cut back on the next estimated tax payment.

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Author: vargaj Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8735 of 120826
Subject: Re: Sabbatical without pay? Date: 1/22/1999 5:55 PM
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The way you do it is to estimate your taxes each quarter and send the taxes in with form 1040ES. The due dates are 4/15, 6/15, 9/15, and 1/15. So if you sold stock for a $10,000 LT gain in Feb and you expect to be in the 15% bracket by the end of the year then you send in $1000 by 4/15. You don't have to be exactly right because the IRS gives you $1000 grace, which means that if at the end of the year, if you have underpaid by $1000, you make it up with your return due on 4/15, without penalty. There are a lot of other rules that apply so you will need to read up on it.

You have the option of not paying quarterly, in which case you could pay the entire tax bill on 4/15 with your return, but then you may have to use form 2210 to calculate the penalty for underpayment.. Form 2210 has an option to calculate the penalty taking in to consideration that the income was not evenly recieved througout the year.

Form 2210 can be pretty complicated so you might want to use software.

Good luck

Joe Varga

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Author: cactusgal One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8740 of 120826
Subject: Re: Sabbatical without pay? Date: 1/22/1999 6:41 PM
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Can any one say "CPA"? The most expensive tax software out there (mine costs $3000 per year) will still give you wrong answers if you don't know the underlying rules.

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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: 8757 of 120826
Subject: Re: Sabbatical without pay? Date: 1/22/1999 7:45 PM
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[[ I hope to take a few years away from the
"hub bub" of 9 to 5. My question to any of
you experienced "Fools" is about how one
should file with no other income than an
occasional sale of stock for annual income.]]

If I were you, I would simply keep filing, year after year, reporting any and all income that you generate, no matter how small.

Why? Because if you don't Uncle Sammy will begin to "backtrack" and look you up many years down the line...even if you were NOT required to file. By filing each and every year, you maintain your "track record", and your future communication with the IRS will be kept to a minimum.

[[ I was reading the Motley's Tax Guide and
stumbled on the estimated quarterly requirements
for anyone whose estimated withheld taxes don't
repesent at least 90% of the taxes they owe.
Do retired persons with no other income have
to file quarterly?]]

Sure...most of them do if they generate enough income. There is really no way to pay in the required taxes. Some may simply pay once a year and also pay the penalty, but that gets tiresome. It's simply throwing your money away.

TMF Taxes
Roy

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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: 8760 of 120826
Subject: Re: Sabbatical without pay? Date: 1/22/1999 7:56 PM
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[[Can any one say "CPA"? The most expensive tax software out there (mine costs
$3000 per year) will still give you wrong answers if you don't know the
underlying rules.]]

That is absolutely correct.

All that tax software will do is to make sure that your return is arithmetically correct. It'll make pretty forms, and will help you through the return.

But it CAN'T interprete the tax laws for you. If you do a lot of reading and studying the laws relative to YOUR situation, and KNOW the law and how it applies to you and your situation, then a tax program is a great tool.

But if you DON'T know or understand the law, a tax program, no matter how good it is, won't save your butt when you make a large technical blunder.

Just my $.02
TMF Taxes
Roy

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Author: trudyKAS One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8792 of 120826
Subject: Re: Sabbatical without pay? Date: 1/23/1999 11:39 AM
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Lucky retired you!!!

In regard to meeting the federal income tax withholding requirement on your income, I have a partial answer for you, You'll need to provided more information to your tax man for the rest.

You can continue to file quarterly tax returns based on your anticipated income. If your estimates are on the money your will have no penalties.

Alternately you could file any of current flavors of W4s with the source of your funds.

For example, You could get in touch with your Social Security office and file a W4v, to hold your choice of 5%....30% or more from your Social Security checks.

This series of witholding forms are new this year. They are also downloadable from the IRS site.

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