Estimated tax vs W4 for new unregistered business income

[hunnypuppy]

I'm looking for a tax professional who can help me file my taxes for my part time business.

Meanwhile, I need a quick input on estimated taxes vs W4 witholdings. I started a software product development business last year (no registered yet). The revenue has been growing this year steadily. So far I've adjusted my W4 withholding (until June) to compensate for the increased revenue from the business. I stopped that in June, i.e. no additional witholding to compensate for the additional income from the software business.

Should I file estimated taxes for June-Aug now and use that for my returns (will it lead to additional paperwork/issues because i didn't file earlier in 2014) or should I just readjust my W4 withholdings from now through the end of the year to compensate for the additional income from June to Dec? If so would there be any penalties? (my current projected witholdings would be > 110% of my last years taxes)

any suggestions on the pro's/con's of the approach?

My wife and I are both working we usually file separately.

 

[tranquility]

What is your goal? If it is to put enough in now so you don't come up with more at filing time, you can certainly put in estimated payments if you like. If your goal is not to be penalized, depending on your income, you need to have 100% to 110% of LAST years taxes paid in. If you overwithheld for 6 months, you will probably be fine. (Along with the fact money withheld has a lesser burden to fall into safe harbor on penalties.)

 

[Silverplum]

I'm looking for a tax professional who can help me file my taxes for my part time business.

Meanwhile, I need a quick input on estimated taxes vs W4 witholdings. I started a software product development business last year (no registered yet). The revenue has been growing this year steadily. So far I've adjusted my W4 withholding (until June) to compensate for the increased revenue from the business. I stopped that in June, i.e. no additional witholding to compensate for the additional income from the software business.

Should I file estimated taxes for June-Aug now and use that for my returns (will it lead to additional paperwork/issues because i didn't file earlier in 2014) or should I just readjust my W4 withholdings from now through the end of the year to compensate for the additional income from June to Dec? If so would there be any penalties? (my current projected witholdings would be > 110% of my last years taxes)

any suggestions on the pro's/con's of the approach?

My wife and I are both working we usually file separately.

Hire a tax professional.

Nobody here is going to run through your taxes. Sheesh.

 

[hunnypuppy]

What is your goal? If it is to put enough in now so you don't come up with more at filing time, you can certainly put in estimated payments if you like. If your goal is not to be penalized, depending on your income, you need to have 100% to 110% of LAST years taxes paid in. If you overwithheld for 6 months, you will probably be fine. (Along with the fact money withheld has a lesser burden to fall into safe harbor on penalties.)

Thanks. The goal is to avoid penalties. I haven't withheld any additional taxes for the last 2 months so was worried about the penalties. Like you said I will be withholding more than 110% of last years taxes but I will fall short of this years total tax due to the additional income (because I stopped the additional withholding 2 moths ago) even if increase my withholding restarting now. My only concern was
1. Avoid penalty at end of year
2. Avoid complications at time to filing (which made me question if I should do a estimates payment, leading to questions if when the revenue was realized)

 

[hunnypuppy]

Hire a tax professional.

Nobody here is going to run through your taxes. Sheesh.

Yes that was my first line. I am looking for one with experience in software taxation.

 

[Silverplum]

Yes that was my first line. I am looking for one with experience in software taxation.

We don't provide referrals here. Not allowed.

 

[tranquility]

Thanks. The goal is to avoid penalties. I haven't withheld any additional taxes for the last 2 months so was worried about the penalties. Like you said I will be withholding more than 110% of last years taxes but I will fall short of this years total tax due to the additional income (because I stopped the additional withholding 2 moths ago) even if increase my withholding restarting now. My only concern was
1. Avoid penalty at end of year
2. Avoid complications at time to filing (which made me question if I should do a estimates payment, leading to questions if when the revenue was realized)

Unless your business is a corporation, safe harbor is based on the previous year.

 

[hunnypuppy]

Unless your business is a corporation, safe harbor is based on the previous year.

Thanks. So I understand that as long as I have paid 110% of last years tax bill I will not pay penalties this year. Just that I will end up with a fatter tax bill at the year right?
So no need for me to make any estimated payment this year.

 

[tranquility]

Thanks. So I understand that as long as I have paid 110% of last years tax bill I will not pay penalties this year. Just that I will end up with a fatter tax bill at the year right?
So no need for me to make any estimated payment this year.

http://www.irs.gov/publications/p17/ch04.html#en_US_2013_publink100032383

See figure 4-A.

 

[tranquility]

First,you have to register your business.Whether your business is small or big,you will have to file your returns.Otherwise you will land up paying more penalties than your amount to be paid.Consult a leading tax consultant like KPMG and sort your taxes and manage your finances well.

Huh? Care to elaborate? Register with who? What returns? Why KPMG for a small business? Heck, for the numbers the OP is talking about, consulting with KPMG to sort out taxes and manage finances might cost more than the profits for the year. (If they would even take him as a client.)

 

[davew128]

Heck, for the numbers the OP is talking about, consulting with KPMG to sort out taxes and manage finances might cost more than the profits for the year. (If they would even take him as a client.)

Might???

 

[tranquility]

Might???

I originally said "would", but know they have a "family business" division and have no idea of the fees they would charge there.