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It's that time of the year again! [2013 Tax Thread]

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  • VoroVoro Registered User regular
    Ok, I need to know if I'm supposed to pay estimated taxes this April.

    Details: Made nothing last year, no tax to pay for 2013. I'll still be filing my taxes just to have the record, as is tradition. This year, I started work as a self-employed contractor in Feb and that will be up in May, hopefully converting to full-time. Will I need to pay estimated taxes quarterly during 2014? Do I have to pay the feds and California?

    Everything I've read is confusing as hell, and I have no idea how I'm supposed to estimate my taxes for the year when I only have three months of work lined up.

    XBL GamerTag: Comrade Nexus
  • localh77localh77 Registered User regular
    Since you don't have any tax liability for 2013, you won't be required to make estimates for 2014 (i.e., you won't pay a penalty for not). But if you don't, you'll owe a bunch of tax in April, so I think you might as well pay quarterly.

    You can get as detailed or keep it as simple as you want. All you need to do is project how much you'll have made by the end of the year, figure the tax on that, and divide by 4. For example, if you think you'll make somewhere around $5k/month, maybe you'll make $50k this year. Subtract ~$10k for standard deduction/personal exemption, and that leaves you with $40k of taxable income. At 2013 levels, that's about $5k in regular tax. Plus you can add $7k for self-employment tax (~15% of $50k). So you should be making ~$3k in quarterly estimates to the feds.

    California would be similar, but I don't really know what the CA tax brackets, deductions, etc. look like, so I don't know how to estimate it. Maybe $1k/quarter or so, just to be safe. The easiest would be to just plug your estimated 2014 income into the 2013 software, and that'll give you a good idea of what you'd owe next year. Some people just pick a flat percentage of their income, and pay that. Usually 25 - 35% is in the right ballpark, depending on how much income we're talking about.

  • GdiguyGdiguy San Diego, CARegistered User regular
    edited March 2014
    Voro wrote: »
    Ok, I need to know if I'm supposed to pay estimated taxes this April.

    Details: Made nothing last year, no tax to pay for 2013. I'll still be filing my taxes just to have the record, as is tradition. This year, I started work as a self-employed contractor in Feb and that will be up in May, hopefully converting to full-time. Will I need to pay estimated taxes quarterly during 2014? Do I have to pay the feds and California?

    Everything I've read is confusing as hell, and I have no idea how I'm supposed to estimate my taxes for the year when I only have three months of work lined up.

    Everything localh says is correct, legally it's not an issue because you only need to (at minimum) pay estimated taxes based off of the previous year's tax amount... but that leaves you with the entire tax bill next April, so that's up to you.

    If you want very ballpark figures, in my experience for the past 7 years or so CA taxes have been on the order of ~1/4 of federal for me, but I have absolutely no idea how self-employment would alter that... your best bet is probably to do what he suggested, just download the 2013 tax forms and do a very quick pass to see what you'll owe.

    The only reason the 3 months thing comes into play is (as far as I understand) is that you're supposed to pay estimated taxes in the quarter when you were paid the money; so you'd be paying estimated taxes in April (Feb & March income) and June (April-May) for those. There's a complicated form you can fill out to actually figure out exactly what you're supposed to be paying in those two quarters, but a) the IRS penalty is basically the interest on what you underpaid, which unless you're making obscene amounts of money isn't really a huge deal, and b) in your case it wouldn't matter anyway since you legally have no requirement for this year. CA is a bit worse (they actually occasionally charge some nominal penalty, though it's hit or miss... one time they just refused to electronically deposit my refund and sent me a refund check with $0.06 deducted as estimated tax late payment penalties), but again for this year you have no legal requirement anyway.

    Gdiguy on
  • VoroVoro Registered User regular
    Ok, thank you both for the heads up. Since it isn't mandatory, I'll save that headache for next year and just keep a decent amount handy for next April. I definitely need to get away from contract work though, I didn't realize the additional taxes were so ridiculous.

    XBL GamerTag: Comrade Nexus
  • shoeboxjeddyshoeboxjeddy Registered User regular
    Ugh, FML. Since I work in a different state (MO) than I live in (IL), that's another return to file. It sucks, but it's expected. What was unexpected was the idea of Illinois FINING me for owing them taxes. Shouldn't the W-4 handle that... like isn't that the EXACT PURPOSE of the W-4? How the fuck do they set up a withholding possibility, not do it, and then fine me for not withholding anything?

  • MulysaSemproniusMulysaSempronius but also susie nyRegistered User regular
    I live in NY and worked in NJ. How it worked for me was NJ taxes were withheld. I was supposed to pay my estimated NY taxes quarterly. I ended up not bothering- there was a fee, but it was low enough that I just paid it every year with my April taxes.

    If that's all there is my friends, then let's keep dancing
  • localh77localh77 Registered User regular
    To be fair, if anything it's your employer's fault for not withholding, not IL's fault. The state's argument would be that it's your responsibility to make sure that taxes are being withheld by your employer. But yeah, I know it can suck to get surprises in April.

    The question is why they weren't withholding. Did they withhold any MO tax, or just no state tax at all? The situation Mulysa described is pretty common. You can end up paying tax on income in two different states, and so you get a credit in your home state for the tax paid to the other state. If they did withhold MO tax, make sure that your IL return has Schedule CR attached, so that you're not paying tax twice.

  • shoeboxjeddyshoeboxjeddy Registered User regular
    localh77 wrote: »
    To be fair, if anything it's your employer's fault for not withholding, not IL's fault. The state's argument would be that it's your responsibility to make sure that taxes are being withheld by your employer. But yeah, I know it can suck to get surprises in April.

    The question is why they weren't withholding. Did they withhold any MO tax, or just no state tax at all? The situation Mulysa described is pretty common. You can end up paying tax on income in two different states, and so you get a credit in your home state for the tax paid to the other state. If they did withhold MO tax, make sure that your IL return has Schedule CR attached, so that you're not paying tax twice.

    They withheld MO tax and I did take the credit (pretty sure I messed it up last year though... woops). I tend to think the idea of estimating my income while on contract (ie, once one ends, it's entirely up in the air if I get another one and at what rate) is ridiculous. My hope is that there's not a computer on the other end waiting to fine me, a person glancing over it might let it go.

  • davidsdurionsdavidsdurions Your Trusty Meatshield Panhandle NebraskaRegistered User regular
    Gee, I hope everyone got their taxes done. If not, get to filing that extension!

  • PsykomaPsykoma Registered User regular
    I love electronic filing + direct deposit.

    Filed last week, refund's already in my bank account.

  • JasconiusJasconius sword criminal mad onlineRegistered User regular
    Ugh, FML. Since I work in a different state (MO) than I live in (IL), that's another return to file. It sucks, but it's expected. What was unexpected was the idea of Illinois FINING me for owing them taxes. Shouldn't the W-4 handle that... like isn't that the EXACT PURPOSE of the W-4? How the fuck do they set up a withholding possibility, not do it, and then fine me for not withholding anything?

    I'm not a corporate accountant, but I'm pretty sure if you file a W4 with an employer and they don't take out witholdings, that's on the employer, not the state. I think your employer has to work with your payroll vendor to establish witholding. The state doesn't do that

  • VoodooVVoodooV Registered User regular
    I know it's late, but maybe it will help for next year.

    I actually work for our state revenue office (work in IT though so Im still tax-clueless, I just have access to a lot of help) and we had ONE perk. A company, CompleteTax let us use their online service to prepare our taxes for free. It was great. But I guess CompleteTax got bought out and they ended that perk. So admittedly, I had gotten very spoiled by this service and I procrastinated for a long while as I dreaded doing taxes the old fashioned way as I hadn't done that for over a decade.

    Eventually though, I got pointed to myfreetaxes.com, which pointed me to H&R Block which did my fed and state return for me for free (have to earn under 58K though) and it was easier than CompleteTax's system.

    Though now that my mutual funds are starting to get bigger, I second Leela's quote of "Suddenly I have an opinion about the capital gains tax!" as my State return went down significantly this year because of it.

  • Wandering HeroWandering Hero Registered User regular
    I know it's only semi related and a bit late but I work with federal financial aid so I can assist with any questions that might be needed there. Please tag me if you need assistance.

    Not today.
  • nexuscrawlernexuscrawler Registered User regular
    Does anyone have any experience doing a W2 replacement form? I have to do one because my old boss didn't report my income to the IRS and sent me no W2. Like how am i supposed to guess my withholdings and shit?

  • localh77localh77 Registered User regular
    edited May 2014
    Yeah, it's a pretty easy form to fill out (I just did one today). Form 4852, I think. If you have your last pay stub of the year, and it shows YTD totals, you're golden, because you can use that to get your totals.

    Although technically the first thing you're supposed to do is call the IRS. If you tell the IRS your employer didn't give you a W-2, the first thing they're going to do is try and get in touch with your employer. And if he wasn't paying in the taxes on your behalf, the IRS gets really pissed.

    edit: here's the link with instructions: http://www.irs.gov/uac/Here-is-What-to-do-If-You-Are-Missing-a-W-2

    localh77 on
  • nexuscrawlernexuscrawler Registered User regular
    Yeah I contacted them they told me to do this form because they have no record of my income from them. the company is gone.

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