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  #1  
Old 09-09-2001, 02:22 PM
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cp cp is offline
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Tax preparation

Do any of you guys/gals start looking at your taxes early?

I was just wondering if anybody takes an early look to see if maybe they made need to make any adjustments before the dreaded time or do you wait and make adjustments for next year?

Hope this doesn't sound too confusing...
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  #2  
Old 09-09-2001, 02:41 PM
Guido Guido is offline
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Well, I think its a great idea!

I know I talk with a lot of people who put their tax money aside in a seperate account all year to ensure its there when it comes time. This takes most of the confusion out of the process, and theres usually a nice bonus in there from extra money (after deductions, etc) and the intrest it earned all year (maybe rolling over in a CD, etc). Its nice to get a little bonus at tax time to maybe buy some new equipment or parts, etc.

Hope this helps!
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  #3  
Old 09-09-2001, 03:15 PM
Lanelle Lanelle is offline
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Don't wait any longer! Talk to a CPA or tax preparer soon so you don't get a really bad surprise during the winter when it's hard to cough up money. The IRS looks for quarterly estimated tax payments. And they aren't very impressed with the 'ignorance' excuse.
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Old 09-09-2001, 08:12 PM
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OK thanks for the reply.

I just sent a letter to my CPA so we can meet and I've been playing with TurboTax to see what I can come up with.

Thanks again..Chris..
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  #5  
Old 09-09-2001, 08:19 PM
GroundKprs GroundKprs is offline
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As a sole proprietor, make your quarterly payments for your earnings each quarter: Jan, Feb, Mar due on Apr 15; Apr, May due on Jun 15; Jun, Jul, Aug due on Sept 15, and Sep - Dec due on Jan 15. Exception to Jan 15 payment: if you file your 1040 and pay all taxes due by Jan 31, you do not have to make the Jan 15 estimated payment. I always us the Jan 31 trick, gets a few more bucks of interest and gets the paperwork hassle over with so I can work on next year. This is for federal taxes, states will vary some.

I like to figure tax roughly around Dec 15. If income is high - and tax bill is high - then consider spending for repairs in late Dec, instead of later during the winter: need new tires on truck(s), trailer(s)? Buy the new machines or replacement engines before the end of Dec., and so on.
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Old 09-10-2001, 05:31 PM
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Stonehenge Stonehenge is offline
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I'm with Groundkprs -

I haven't thus far, but will meet within a month or 2 with my CPA to see if I need to be spending some of my $$ to reduce my tax burden. Aside from setting any $$ aside, you also want to make purchases in a fashion that reduces whatever tax burden you might have.

I'm probably OK for this year because I spent some on new toys this year, but I'm also looking for some land. What they tell me will help me decide whether I buy it before 12/31 or after.
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  #7  
Old 09-11-2001, 05:18 AM
SLS SLS is offline
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Originally posted by Guido:
Quote:
I know I talk with a lot of people who put their tax money aside in a seperate account all year to ensure its there when it comes time. This takes most of the confusion out of the process, and theres usually a nice bonus in there from extra money (after deductions, etc) and the intrest it earned all year (maybe rolling over in a CD, etc). Its nice to get a little bonus at tax time to maybe buy some new equipment or parts, etc.

I tried that tactic and got royally reamed by the I.R.S.!!!


If you are self-employed and are NOT making quarterly estimated tax payments be prepared for a rude shock...courtesy of the I.R.S.

My first year as a self-employed person I did not understand the "quarterly estimated payments" system and just paid my total taxes before the April 15th deadline the following year.

I got hammered for several hundred dollars more (penalties) just because I did not file quarterly! I called the I.R.S. and they told me that "Self Employment Tax" (Social Security) MUST be paid quarterly.

Something else on this topic:

If you send in an amount that is lower or greater than the predetermined figure on your 1099-ES (quarterly payment stub from the IRS) then you must also obtain a Form 1022 and send it in with your 1040 in April. Because my business is better this year than it was last year I decided to send more in instead of having to pay up in April.

Then I found out that if the figure you send in is a different amount than the figure that the I.R.S. has estimated for you it triggers the computer as a mistake. This is because taxpayers were sending in amounts LOWER than the predetermined estimate in order to stash their money elsewhere and collect interest and then pay off the balance the following April.

I asked the I.R.S rep point-blank: "You mean I can be penalized for sending you guys MORE money than I'm supposed to..while you're collecting interest on it?"

He says: "YES!...the computer does not distinguish between more or less money paid...only that there is a discrepancy in the amount."

So now I have to get this FORM 1022 and fill it out explaining why I paid MORE than the estimated figure...or get penalized!

Pay to LITTLE...get punished.
Pay to MUCH...still get punished.

"Your tax dollars at work-courtesy of the U.S. Treasury."

I'm just telling you what the I.R.S. guy told me...and a C.P.A. that I later talked to said that this was correct.

Last edited by SLS; 09-11-2001 at 05:25 AM.
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  #8  
Old 09-11-2001, 11:07 AM
bruces bruces is offline
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ESTIMATED TAXES

SLS wrote

------------------------------------------------------------------------------------
If you send in an amount that is lower or greater than the predetermined figure on your 1099-ES (quarterly payment stub from the IRS) then you must also obtain a Form 1022 and send it in with your 1040 in April. Because my business is better this year than it was last year I decided to send more in instead of having to pay up in April.

Then I found out that if the figure you send in is a different amount than the figure that the I.R.S. has estimated for you it triggers the computer as a mistake. This is because taxpayers were sending in amounts LOWER than the predetermined estimate in order to stash their money elsewhere and collect interest and then pay off the balance the following April.

I asked the I.R.S rep point-blank: "You mean I can be penalized for sending you guys MORE money than I'm supposed to..while you're collecting interest on it?"

He says: "YES!...the computer does not distinguish between more or less money paid...only that there is a discrepancy in the amount."

So now I have to get this FORM 1022 and fill it out explaining why I paid MORE than the estimated figure...or get penalized!

Pay to LITTLE...get punished.
Pay to MUCH...still get punished.

------------------------------------------------------------------------------------

I'm a CPA in my day job. You will not be penalized for paying too much. If you pay a different amount than your estimated vouchers (which are set up by you or your tax preparer, the IRS has no idea of what you should be paying other than based on last years tax return) and that amount is short of the amount you should have paid for the year, then you may be subject to penalty.

Generally, you should pay in an amount equal to last years tax or 90% of the current years tax if your adjusted gross income is $150,000 or less. If your income is over this level, higher limits apply. The adjusted gross income is total income on the return (including spouse's earnings, interest, dividends, etc.) This is line 33 of your 2000 form 1040.

My best advice, follow the guidance of your tax preparer. Most will set up estimates to keep you safe from penalty based on your prior year's tax return. If you pay as set up, you usually will not have a penalty, regardless of how much more you might owe when your return is completed.

If income is changing substantially from the prior year, check with your tax preparer and find out what effect it will have on your tax situation. There is very little that can be done to minimize tax liability once the year is over.

Prior to the end of the year, you can buy equipment, pay repair bills, buy supplies, etc. that could save you taxes.
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  #9  
Old 09-11-2001, 03:37 PM
SLS SLS is offline
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bruces:

Thanks for the info...but now I'm more confused.

What's the deal with the FORM 1022 then? Does that mean I DO NOT have to do this extra paperwork if I overpay on the Estimated Vouchers due to increased income?

My tax preparer did the estimates based on the previous years income so that part was ok. My real trouble was paying the total in April.

The IRS needs to better train their people to explain 'over payment consequences' I suppose. He was basically telling me that if all 4 amounts were not identical on my Estimated Tax Vouchers it would throw up a 'flag' and the 1022 whould be used to straighten it out and help me avoid penalities. I guess you get what you pay for when it comes to government employees.

I'll discuss this more with my tax preparer...he knows I'm not a tax wiz.

Thanks again for the info!
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  #10  
Old 09-11-2001, 05:17 PM
bruces bruces is offline
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SLS

If you paid the total tax in April instead of paying estimates quarterly, that is what the penalty was for. You are supposed to pay quarterly. (The form # for the penalty is 2210).

Like you say, your accountant / tax preparer should be able to explain.
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