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Withholding question

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C

CAcomic

Junior Member
Hello,

Not sure if I am in the correct forum, but thought I would try here.

I have had a full time job and a self-employed/moonlighting business the past 10 years. I always took out extra withholding from my full-time to cover the self-employed portion. So, I have never had to pay quarterlies.

This September, I decided not to go back to the full time (teacher) and focus on the self-employed. Since the amount of withhholding from the full-time earlier in the year will not cover the self now, I realize I will have to pay quarterly.

My first quarter as completely self-emplyed will be this last quarter. Does anyone know what the penalty (%wise) will be roughly since I did not pay the first three quarters and will definitely owe with or without the 4th quarter payment? My guess is that before I pay the 4th quarter, my taxes for the year (after deducting the withholding would be about $4,000).

Should I pay the fourth quarterly tax or just start the new year with quarterlies? In other words, will the penalty be different if I just owe for not taking enough withholding out for the year or will it be less if I pay the fourth quarter (though not covering everything).

Thanks,
Mike
 


LdiJ

LdiJ

Senior Member
CAcomic said:
Hello,

Not sure if I am in the correct forum, but thought I would try here.

I have had a full time job and a self-employed/moonlighting business the past 10 years. I always took out extra withholding from my full-time to cover the self-employed portion. So, I have never had to pay quarterlies.

This September, I decided not to go back to the full time (teacher) and focus on the self-employed. Since the amount of withhholding from the full-time earlier in the year will not cover the self now, I realize I will have to pay quarterly.

My first quarter as completely self-emplyed will be this last quarter. Does anyone know what the penalty (%wise) will be roughly since I did not pay the first three quarters and will definitely owe with or without the 4th quarter payment? My guess is that before I pay the 4th quarter, my taxes for the year (after deducting the withholding would be about $4,000).

Should I pay the fourth quarterly tax or just start the new year with quarterlies? In other words, will the penalty be different if I just owe for not taking enough withholding out for the year or will it be less if I pay the fourth quarter (though not covering everything).

Thanks,
Mike
Click to expand...
The more you cover with a 4th quarter estimate, the lower your penality will be. You also need to note that your first quarter estimate for 2008 will be due at the same time that any tax for 2007 is due. Therefore, you really want to avoid owing much on your 2007 taxes.
 
E

efflandt

Senior Member
See IRS publication 505 http://www.irs.gov/publications/p505/index.html

Since your tax withholding was less than 2006 and your 2007 withholding was likely less than 90% of your 2007 tax, you definitely want pay within $1000.00 of total tax by the due date for the 4th quarter estimated payments (Jan 15th?).

I don't know enough about your details to know if there would be a penalty for not paying sooner, because increased withholding from your teaching job earlier in the year may have covered more than that work time for your self employment. Go through the estimated tax forms and see what they say, or hire a pro.

If you are up to date by due date for last quarter of this year and owe/pay less than $1000.00 at April 2008 filing date for 2007 taxes, no penalty will apply at that time, and they may not even look back. But if you owe $4000.00 then, there will be a penalty.

PS: I am not an expert, just trying to keep up with W-4 form withholding adjustments for IRA to Roth IRA conversions.
 
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