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 anoccasional sale of stock for annual income.I was reading the Motley's Tax Guide andstumbled on the estimated quarterly requirementsfor anyone whose estimated withheld taxes don'trepesent at least 90% of the taxes they owe.Do retired persons with no other income haveto file quarterly? What do you think Fools?ramblinman
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
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 luckJoe Varga
Hey Joe, Thanks for the words of advice, especiallyabout the medical. One other question arises.If I don't know how much security I'll liquidateand for what kind of capital gain how the heckam I supposed to estimate for Uncle Sam? ramblinman
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.
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 luckJoe Varga
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.
[[ 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 TaxesRoyWant 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. It'll help you with your 1998 taxes, and it's never to early to start planning for your 1999 taxes. 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. 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.
[[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 $.02TMF TaxesRoy
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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