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CounterSeal
Member
(04-10-2009, 02:35 AM)
I finished college in December 2008 and just worked a contract job from February to March of this year 2009. Before that, my last job was back in 2005, which was one of those part-time high school jobs (I don't think that matters anymore, does it?) What I am confused about is if I even need to pay Estimated Taxes by April 15th and for the rest of 2009? The 1040 form says the following:

Exception. You do not have to pay estimated tax for 2009 if you were a U.S. citizen or resident alien for all of 2008 and you had no tax liability for the full 12-month 2008 tax year. You had no tax liability for 2008 if your total tax was zero or you did not have to file an income tax return.

The Turbotax Help area seems to reflect that:

Do I need to pay estimated taxes?
That depends on your situation. The rule is that you must pay your taxes as you go.

If at filing time, you have not paid enough income taxes through withholding or quarterly estimated payments, you may have to pay a penalty for underpayment.

To determine whether you need to make quarterly estimates, answer these questions:
1.Do you expect to owe less than $1,000 in taxes for 2008 after subtracting your federal income tax withholding from the total amount of tax you expect to owe? If so, you're safe—you don't need to make estimated tax payments.
2.Do you expect your federal income tax withholding (plus any estimated taxes paid on time) to amount to at least 90% of the tax that you will owe for 2008? If so, then you're in the clear, and you don't need to make estimated tax payments.
3.Do you expect that your income tax withholding will be at least 100 percent of the tax on your 2007 return? Or, if your adjusted gross income (Form 1040, line 37) on your 2007 tax return was over $150,000 ($75,000 if you're married and file separately in 2008), do you expect that your income tax withholding will be at least 110% of the tax you owed on for 2007? If so, then you're not required to make estimated tax payments.
If you answered "no" to all of these questions, you must make estimated tax payments with Form 1040-ES. To avoid a penalty, your total tax payments (estimated taxes plus withholding) during 2008 must satisfy one of the requirements we just covered.


Since I did not work at all and had no income in 2006, 2007, and 2008 (full-time student), and did not file tax refunds or anything like that... according to these instructions... I don't need to worry about any quarterly estimated tax payments this year? I didn't start getting any income until February 2009.

I asked some friends about it, but understandably, I've gotten mixed responses since everyone's situation is different. One of my friends mentioned that he filled out both a 540ES (residents of California) and a 1040ES and sent two seperate checks, wtf? I apologize for sounding like a total newb, but I just want to be 100% sure as to not blindly write checks, and to not get fined for failing to pay uncle sam on time either.
CharlieDigital
Has No Sense Of Humor
(04-10-2009, 02:28 PM)
CharlieDigital's Avatar
Estimated taxes are always for the tax year that you are in. For example, if you start paying estimated taxes now, you are paying your taxes ahead of time for the year 2009. So when 2010 comes around, you will be filing your tax return for 2009, you will have already made payments to the IRS all through 2009. You would never pay estimated taxes on a prior years return (i.e. 2008). For reference, this year, everyone is filing tax returns for 2008. Next year, everyone will be filing tax returns for 2009.

Unless you're going to owe shitloads in taxes (too little withholding, you plan on making a lot of untaxed money in 2009) or you are self employed (i.e. you are incorporated -- in which case, I think you are required to pay taxes on a regular schedule), you should never pay estimated taxes.

The penalty is so low, it's not even worth it. I owed like, $12,000 last year (for the year 2007) in taxes and the penalty was only $100 for not paying estimated taxes quarterly. My accountant set up an estimated tax payment schedule of $2,000 per quarter, for the tax year 2008, but I was like, "Why bother"? I get to keep my money and the interest on the late payment is so low, it's ridiculous to pay it ahead of time.

If you're making chump change, you don't have to file an ES. Just file your normal 1040. Your taxes should normally be handled by your employer. If you were working on a 1099, you will probably end up owing a penalty when you file, but the rate is so low, it's not worth getting huffy about. If you want the government to save your money for you, I guess you can pay estimated taxes for 2009...you'll just get all the extra back in your tax return in 2010. Basically, if you overpay, you'll get your money back when you file your return in 2010.

Many sites offer free simple returns and e-filing. You can check out

http://taxact.com
http://turbotax.com
http://hrblock.com

The free editions should be enough for most recent college grads I would think. The other versions aren't that much more expensive if your income/tax scenario isn't that complicated. Otherwise, if you have a lot of deductions and varied sources of income, it's a wise investment to get an accountant (a real one). I always run my taxes through turbotax once myself and then take it to the accountant to see the difference. This year, he saved us like, $3000.

Also, 30% :lol --> http://www.neogaf.com/forum/showthread.php?t=357692
Last edited by CharlieDigital; 04-10-2009 at 02:42 PM.
CounterSeal
Member
(04-11-2009, 12:47 AM)
Wait, so what does the exception mean? Unless I read it incorrectly, it seems to say that if I basically had no taxable income in 2008, I don't have to pay estimated taxes for 2009... and of course I had no income at all in 2008 because I didn't have a job and was going to school full-time. Also, on the 1040 instructions it says that generally, if I expect to owe less than $1000, I wouldn't have to pay Estimated Taxes anyway according to that. I only made about $2600 this last quarter from February 13th to March 31st, 2009. Even at 30%, that's less than $1000, so doesn't that mean I won't have to pay Estimated taxes?

I keep feeling that there's something obvious I am missing, because this utterly confuses me... I tried calling the IRS help line today, but the waiting time for the Estimated Taxes reps were insanely long so the automated system just told me to try again later and hung me up =/
CharlieDigital
Has No Sense Of Humor
(04-11-2009, 12:55 AM)
CharlieDigital's Avatar

Originally Posted by CounterSeal

I keep feeling that there's something obvious I am missing, because this utterly confuses me... I tried calling the IRS help line today, but the waiting time for the Estimated Taxes reps were insanely long so the automated system just told me to try again later and hung me up =/

Yes. You are missing the fact that you don't have to pay estimated taxes. The worst that could happen is that you under pay at the end of the year. In which case, you will simply owe the IRS more money and a very small penalty. Not a big deal.
CitizenCope
Member
(04-15-2009, 01:11 AM)
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Little OT here but what is the best(cheapest) site to do your taxes on? Is it Turbo Tax? I've used Turbo before but wasn't sure if any new sites have come a long and do it cheaper.
NZNova
Member
(04-15-2009, 02:50 AM)
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[img]http://i41.************/ippgzk.jpg[/img]

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