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Posted by derkire on June 12, 2008, 9:51 pm
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Earlier this year (2008), I paid a sizable amount (say 100k for
simplicity) in 2007 CA state taxes. It was probably a big blunder
not to expedite that payment in 2007, so that I could deduct it
against 2007 federal income, but too late to do anything about
that. I just didn't know the rules.
I expect 2008 to be a considerable leaner year than 2007, in
terms of income/gains.
I'm trying to understand the implications of the 100k payment on
my 2008 federal and state taxes. There are two areas that I have
identified as likely sticky points.
1. Payment of estimated taxes in 2008
Since I have a 100k deduction available, I would like not to
pay estimated taxes in 2008 until I reach 100k worth of
income/gains. Is this a reasonable approach for fed and state
estimated taxes?
I further plan on using irs.form2210/2210AI and the
"annualized" method to avoid troubles with underpayments of
estimated tax if income/gains arrive unevenly (and I think
they will).
2. AMT in 2008
With the big whopping 100k deduction being a tax preference
item for AMT, I think I risk that AMT will be larger than
regular tax in 2008, and hence take effect. If this occurs,
will AMT then lead to penalties for underpayments, since per
assumption I did not make estimated tax payments in some or
all quarters?
Thanks.
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Posted by Mark Bole on June 12, 2008, 10:16 pm
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derkire@gmail.com wrote:
> Earlier this year (2008), I paid a sizable amount (say 100k for
> simplicity)
Since it already happened, let's not worry about simplicity. What did
you actually pay?
-Mark Bole
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Posted by derkire on June 13, 2008, 9:11 am
Please log in for more thread options > derk...@gmail.com wrote:
> > Earlier this year (2008), I paid a sizable amount (say 100k for
> > simplicity)
>
> Since it already happened, let's not worry about simplicity. What did
> you actually pay?
>
> -Mark Bole
>
Mark, I was trying to anonymize a bit here, but I see your
point that the actual amount may matter.
Answer: 270k
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
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Posted by derkire on June 13, 2008, 1:27 pm
Please log in for more thread options Ok, some more numbers:
270k state tax for 2007 paid in 2008, and to deduct against 2008
income.
Not expecting any substantial regular income in 2008, just cap gains
as shown below.
q1: 75k cap gains, paid 20k(fed)+8k(state) est tax
q2: 85k cap gains, cintemplating paying 25k(fed) and 8k(state) est tax
q3: maybe similar
q4: maybe similar
Should I just pay it and get it over with? Is there any big downside?
I don't expect to get much more than 2% on this cash anyway, so
maybe I should just pay as if I didn't have the big deduction and
get it over with. What interest rate will IRS pay me on
overpayment :-)?
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by removeps-groups@yahoo.com on June 13, 2008, 2:38 pm
Please log in for more thread options On Jun 13, 10:27 am, derk...@gmail.com wrote:
> 270k state tax for 2007 paid in 2008, and to deduct against 2008
> income.
> q1: 75k cap gains, paid 20k(fed)+8k(state) est tax
> q2: 85k cap gains, cintemplating paying 25k(fed) and 8k(state) est tax
> q3: maybe similar
> q4: maybe similar
If that's all there is to it, it will be easy with any regular tax
program. For Q1, just multiply 75*4=300 for annualized AGI.
Calculate the state tax quarterly payment first, probably something
like 22.5%*10%*300k=6750 in California and pay it. Of course, there
are deductions, AMT, mortgage interest, etc to consider. Then
calculate the federal Q1 installment; use the state Q1 paid times four
(to annualize the itemized deduction) as well as the 270k paid for
last year.
As your income is pretty high, you could just pay a pro 1k to 2k to
take care of it as well as some financial planning. For example, if
you don't take any capital gains in Q2, Q3, Q4 then you probably will
get the full benefit of the 270k deduction as you likely won't be in
AMT (and you'll even get the stimulus credit for your 2008 federal
return). On the other hand, your income might be so low that part of
the 270k will be forever lost. And besides, you might need some
money.
> Should I just pay it and get it over with? Is there any big downside?
> I don't expect to get much more than 2% on this cash anyway, so
> maybe I should just pay as if I didn't have the big deduction and
> get it over with. What interest rate will IRS pay me on
> overpayment :-)?
If you overpay your Q1 installment or any installment, you don't get
any interest. Muni mutual funds may give a better return than the 2%
of banks, though there is some risk if the bond price falls.
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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