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magicman
04-27-2009, 08:46 PM
Can you start estimated taxes after the first quarter. Say you start up a business after the first quarter, do just start off with the second quarter?

Also, I understand that you estimate what you will make for the year and then break down the tax owed into 4 payments. Can you estimate what you will owe, but pay the taxes on what you really made for that quarter?

EDIT: I just saw this on the IRS website:

Estimated tax not required
You do not have to pay estimated tax for 2009 if you meet all three of the following conditions.

*You have no tax liability for 2008
* You were a US citizen or resident for the whole year
* Your 2008 tax year covered a 12 month period

I know I meet the first two, but I do not understand the last one.

Evan
04-27-2009, 09:06 PM
The requirements that prevent estimated tax payments:


No Tax Liability. This means on your 2008 tax return that you had paid NO tax and got a complete refund of ALL money withheld. The fact that you had a refund doesn't mean you had NO tax liability. Line 61 would be your total tax liability.
Citizenship. This one is pretty clear.
Full Tax Year. This also applies in almost all cases, though there are a few exceptions. I haven't seen this as the "holding" point for someone.

Estimated tax payments may be made in the quarters in which you had the tax liability. So if you start this quarter, you may need to make estimated tax payments. But say the next two quarters business tapers off and you don't do so well -- the estimate numbers can be adjusted so you could have less (or more -- if that applies) paid.

Estimated taxes aren't required unless you expect to OWE over $1,000. Most Schedule C filers are required to pay estimated taxes because of self-employment tax.

There are penalties for not paying your taxes timely. I'd recommend seeing a professional to minimize any estimated penalties if your income is spuratically and isn't earned consistently throughout the year (i.e. your two "big seasons" are say in June and December).

magicman
04-27-2009, 09:26 PM
I do not know how much to expect to owe this year, as this is the first year in business.

Do I just come up with a number? What do I do?

Evan
04-27-2009, 09:52 PM
Look at the instructions for the 1040-ES. http://www.irs.gov/pub/irs-pdf/f1040es.pdf

A worksheet is provided. It requires you to do some number crunching.

magicman
04-27-2009, 10:01 PM
What is the adjusted gross income?

I had no owed taxes last year, so do I just put what I estimate I will owe this year? I am lost, as I do not have some of the numbers.

Do I just put what I think I will make for that?

vangogh
04-28-2009, 01:34 AM
Since this is your first year you're really making a guestimate. Think less of the estimate as making sure you meet the IRS requirements and more as a way to pay taxes over the year instead of having to pay everything next April.

You could estimate low and not have to pay much or anything now, but you might also then be opening yourself to owing a lot of money all at once. The worst case scenario for estimating too much is you'll get a nice refund in April or have plenty of money for your first estimated payment next year.

Read through the form. It's really simple and yes it does start with a bit of a guess as to how much you'll make.

magicman
04-28-2009, 09:53 AM
So, I just put down an estimate for the first line, Adjusted Gross Income?

Then I make payments on the number the form gives me.

The 1040, schedule c and 1040 se get sent in on april 15 with a check if I owe more, and no check if I paid more than I make, right?


I wish the IRS would make all of this a bit easier to understand.

vangogh
04-28-2009, 01:32 PM
You're making this so much more complicated than it is. Download the forms and look at them. If you're still confused you should probably talk to an accountant.

Evan
04-28-2009, 09:45 PM
Your Adjusted Gross Income is the last line on page 1 of the 1040, or the first line of page 2 (the number carries over).

The fact you OWED no additional tax doesn't mean you didn't PAY tax. Again, if I had $800 withheld and got $300 back -- that doesn't mean I didn't have tax liability. My tax liability in this case would be $500. I did explain to you in another thread where to look for this number on your 1040.

Calculating your AGI for the coming year can be complicated. This is why it is an estimate.

If you do not have an accountant and are serious about making this business succeed, I'd highly recommend developing a good relationship with one. They will be your greatest resource and look out for things that benefit YOU.

Most people that go into a new business do it because they believe in their idea and think it'll be successful. Not because they understand the tax and legal ramifications and how that impacts them. Luckily there are professionals to handle both of those manners.

magicman
04-29-2009, 09:57 AM
In 2008, I graduated high school and started college. I have never had a job, and therefore had nothing withheld. I have never filled out a tax form.

If I had no job and had no taxes owed, do I have no tax liability?

vangogh
04-29-2009, 11:45 AM
You haven't had any tax liability in the past.

I know the tax forms are confusing, especially if you haven't had to fill them out before, but try not to worry too much about them. It's more important to focus on getting your business going and bringing in some money first.

You're probably safe in not paying estimated taxes this year. If you're in college now I'm guessing you're not looking to make tons of money this year either. Odds are you may not owe any taxes next year either.

Evan
04-29-2009, 09:49 PM
You probably would be fine without filing estimated tax payments. My recommendation, if you get another job in addition to this gig, is to have the maximum withheld from your paycheck (Single 0).

And seeing as you are a college student -- I'd recommend finding a local CPA to do your tax returns. You will probably pay much less than the big box "tax" shops. Your school may also have a VITA (Volunteer Income Tax Assistance) program if an accounting program exists at the school. In that case, you may be able to get your tax return done for free.