The Small Business Tax Help Blog

Posts Tagged ‘penalty,’

Question: Estimated tax on a one-time capital gain?

In 2010 I had a substantial capital gain that resulted in my owing more than $1000 when I filed my federal tax return. Fortunately I had withheld more than 100% of my 2009 tax and so avoided the underpayment penalty.

My question is, what should I do in the future?
I can adjust my W-4 to withhold more, but this gain was atypical (I sold a stock I had been holding for years when it shot up in price). I’d rather not overpay if I don’t have to.

I know that estimated taxes are due quarterly. If I have a one-time gain in August, can I simply pay a 3rd-quarter estimated tax of 15% without paying estimates in the other quarters? And if so, is there a certain form I need to fill out with my tax return explaining why I paid that way?
@B.L.O.C, in 2006 did you withhold 100% of your 2005 tax?

Answer: Yes you can send in an estimated payment for only that quarter, not the other quarters. And that’s probably the easiest way to handle it. And you don’t have to explain anything on why you did it that way.

How to File Your Taxes Online : How to E-File Taxes

Question: what is an underpayment penalty and why is my tax program saying that i might owe one?

hi,

last year i took out some of my 401K. i will owe around $1600 in taxes this year estimated by my tax program. i have the money set aside and will pay it right away when i file. i took the money out of my 401k because i only worked for 2 and a half months in 2008 before i moved to europe after i was married to help with moving expenses and pay off some debts.

the tax program i’m using (HR Block online) says the 2210 form won’t be available till february but that i can file without using it and they will send me a bill. from what i understand is the program is only estimating that i won’t pay all my taxes by april 15? i just want to file it already and pay what i owe and get it over with long before april 15th.

Answer: If you owe more than $1,000 when you file you may be subject to a penalty for underpayment of estimated taxes.

There are 2 Safe Harbor exceptions to underpayment penalties:

1. Owe less than $1,000 at filing time.

2. Pay in at least 90% of your total tax liability regardless of how much you owe when you file.

3. Pay in at least 100% of the PRIOR year’s tax liability regardless of how much you owe when you file. This rises to 110% if your AGI is $150k or more ($75k if married filing separately).

The IRS will calculate the penalty if you do not include Form 2210. If any of the Safe Harbor exceptions apply based upon their records the penalty will not apply.

3 Ways to Pay For a Roth IRA Conversion

Taxpayers can get a break in 2010, but they still have to find funds to pay for an IRA conversion.

Question: What is the easiest way to calculate my 4th quarter estimated tax payment?

I think we have under paid our income tax for 2008 and want to find out how much we owe and avoid any late penalties on unpaid taxes. How can I do a quick calculation to figure out how much we owe?

Answer: Send in all you made. Uncle Sam will send back what he doesn't need - maybe!

Vermont town meeting season kicks off with vote to cut taxes in Isle La Motte

ISLE LA MOTTE — An embezzlement, budget fights and political feuds have riven this island community for three years, but on Saturday residents found something everybody could agree on: a big tax cut.

Our Pay As You Earn Tax System

BusinessWise brief: Dealing with unwanted gifts

This week, our experts offer tips on returning gifts without a receipt, picking a savings account and whether tips are subject to income tax.

Social Security, Medicare and Other Taxes

Question: How is a defined contribution early withdrawl Tax Withholding calculated?

I know that first there’s a 10% penalty on the early distribution of a defined contribution account, but at the same time, how would the FIT and other taxes withholding be calculated for an early distribution? IE is it a flat percentage like supplemental income? Or is it annualized? Or is it by some other formula? Also, since FICA taxes are not exempt from withholding on defined contribution deductions, will FICA be taken out of the withdrawl again? Thanks!

Answer: Okay, it's flakey.

You paid the fica/mc when you made the money, so that is not an issue now.

When you take the money out, typically they withhold 20%. 10% for the penalty and 10% towards your tax bill. The problem is, you won't know your tax rate until you know your income for the entire year. Occasionally I encounter someone who was so broke, they didn't pay income tax and got a refund. Most of the time, I encounter people who are in the 15% and 25% tax brackets scrambling to come up with more money.

U.S. Attorney: Phony tax preparer filing false returns

Nashville woman pleads guilty to federal charges More

tax help: what is the trust fund penalty tax?