Estimated tax and credits question

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Subject Author Date Estimated tax and credits question michaelloll 02-05-2007  Re: Estimated tax and credits question Benjamin Yazersky CPA 02-06-2007  Re: Estimated tax and credits question ed 02-06-2007  Re: Estimated tax and credits question michaelloll 02-10-2007
Posted by michaelloll on February 5, 2007, 8:22 pm Please log in for more thread options I had a question about paying estimated taxes. Here is my situation, basically, I expect to make an extra $5000-10,000 this year in self employment income, on top of my regular salaried income from my job. I'd rather not have to bother filing estimated taxes. My understanding of estimated taxes and the safe harbour provision is that if I can cover 90% of my taxes through my salary, I should be fine and not have to pay estimated taxes (or a penalty for not paying them). I will have a deduction in 2007 of roughly $16,000-17,000 for my mortgage interest. That is my biggest deduction. So, is the following scenario safe? I'll use rounded numbers to make things easy. Income: $50,000 (normal taxes withheld) Self employment income: $10,000 Total income: $60,000 Deduction: $15,000 (house interest) So given this scenario, as long as my extra income doesn't go above my deductions, I should be fine, right? Taking into account that I'll pay the extra self employment taxes too, so I can't quite make a one for one match between my deductions and my extra income. Make sense? -- Mike << ======================================================= >> << 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 (2006) - All rights reserved. >> << ======================================================= >> Posted by Benjamin Yazersky CPA on February 6, 2007, 9:39 pm Please log in for more thread options > I had a question about paying estimated taxes. Here is my > situation, basically, I expect to make an extra $5000-10,000 > this year in self employment income, on top of my regular > salaried income from my job. I'd rather not have to bother > filing estimated taxes. My understanding of estimated taxes > and the safe harbour provision is that if I can cover 90% of > my taxes through my salary, I should be fine and not have to > pay estimated taxes (or a penalty for not paying them). > > I will have a deduction in 2007 of roughly $16,000-17,000 > for my mortgage interest. That is my biggest deduction. > So, is the following scenario safe? I'll use rounded > numbers to make things easy. > > Income: $50,000 (normal taxes withheld) > Self employment income: $10,000 > Total income: $60,000 > Deduction: $15,000 (house interest) > > So given this scenario, as long as my extra income doesn't > go above my deductions, I should be fine, right? Taking > into account that I'll pay the extra self employment taxes > too, so I can't quite make a one for one match between my > deductions and my extra income. I really don't know what "normal taxes withheld" means However, you can adjust your withholding by claiming fewer or more exemptions When you have self employment income you also need to account for the self employment taxes The safe harbor for avoiding a penalty for underpayment of estimated tax is the lesser of 90% of current year, or 100/110% of the previous year - that depends on your agi amount ... and don't forget about the state tax on your income ___________________________________ <<< Benjamin Yazersky, CPA [NJ & NY] >>> -----> real address on hobokeni or hobokenx <----- << ======================================================= >> << 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 (2006) - All rights reserved. >> << ======================================================= >> Posted by ed on February 6, 2007, 9:39 pm Please log in for more thread options michaell...@hotmail.com wrote: > I had a question about paying estimated taxes. Here is my > situation, basically, I expect to make an extra $5000-10,000 > this year in self employment income, on top of my regular > salaried income from my job. I'd rather not have to bother > filing estimated taxes. My understanding of estimated taxes > and the safe harbour provision is that if I can cover 90% of > my taxes through my salary, I should be fine and not have to > pay estimated taxes (or a penalty for not paying them). > > I will have a deduction in 2007 of roughly $16,000-17,000 > for my mortgage interest. That is my biggest deduction. > So, is the following scenario safe? I'll use rounded > numbers to make things easy. > > Income: $50,000 (normal taxes withheld) > Self employment income: $10,000 > Total income: $60,000 > Deduction: $15,000 (house interest) > > So given this scenario, as long as my extra income doesn't > go above my deductions, I should be fine, right? Taking > into account that I'll pay the extra self employment taxes > too, so I can't quite make a one for one match between my > deductions and my extra income. > > Make sense? NO. The mortgage interest is after a 7 1/2% of AGI deductible and then must be more than your Standard Deduction (which you don't say ) to be worth while. The better "safe Harbor" is that your withholding be as much as your prior year's taxes. That waives any penalty and you can pay the rest in April with your return. If your withholding in 2006 was less than last year's tax the penalty is only about 5 1/4% on the deficiency, but if you make up that difference before April 15 the penalty is reduced by .022% per day ( that's 8% annually simple interest ). ed << ======================================================= >> << 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 (2006) - All rights reserved. >> << ======================================================= >> Posted by michaelloll on February 10, 2007, 6:05 am Please log in for more thread options Thanks to all who have replied, both via email and here. All told, I've decided to consult a local CPA. :) << ======================================================= >> << 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 (2006) - All rights reserved. >> << ======================================================= >> Similar Threads Posted Estimated tax question April 28, 2009, 4:59 pm question about paying estimated taxes June 13, 2009, 4:35 pm Education Credits January 27, 2008, 3:26 pm Energy Credits October 6, 2008, 11:04 am Energy Credits for 2006? August 6, 2007, 10:31 pm How do I maximize benefit of tax credits? September 3, 2007, 10:14 pm Re: How do I maximize benefit of tax credits? September 6, 2007, 4:10 am Re: How do I maximize benefit of tax credits? 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