What is the penalty for being late on estimated quarterly taxes?

[dorethawsp]

As fate would have it in these times, I'm still waiting for the check I was going to use to pay my quarterly taxes... Is it a big deal if I'm a few days to a week late on these?

[calle mayor]

No big deal. The penalty for underpayment of estimated tax is calculated based on the 8% annual rate right now. This translates into 0.0219187% times number of days late times the amount of the underpayment for the time period in question.

[Poker CPA]

Real men don't pay estimated taxes. We wait until the last possible moment, MIDNIGHT APRIL 17th. The interest charge is about 4% times times the tax due on April 17th. The IRS likes to call it a penalty, but its just simple interest. So if you owe $10,000 on April 15th, the interest is $400, give or take. And if you pay in to much, the IRS doesn't pay you interest. Real men don't fall for this trick, we invest OUR money wisely. (Except the guys who left it in Neteller).

[ilikeaces86_]

[ QUOTE ]
Real men don't fall for this trick, we invest OUR money wisely. (Except the guys who left it in Neteller).

[/ QUOTE ]


Why u gotta hate /images/graemlins/frown.gif

[FatalError]

I emailed my accoutant about this to confirm (because i don't trust anything i read about taxes on 2p2) but if this is true i'm gonna stop paying quarterlies because if it's 4% simple interest, any donk could do better than that via ing direct

[Poker CPA]

I admit I hate taxes. Guilty as charged

[BigBiceps]

[ QUOTE ]
As fate would have it in these times, I'm still waiting for the check I was going to use to pay my quarterly taxes... Is it a big deal if I'm a few days to a week late on these?

[/ QUOTE ]

Sometimes they don't notice. Especially if you might be using the annualized method. This is for the IRS.

The state always seems to notice (and sometimes even when they are wrong they give a penalty). It is usually under 20 bucks so I just pay instead of bothering with them.

[Poker CPA]

The interest is about 8%, but the math is right (4% times tax due), give or take. And the IRS does NOT pay you interest if you overpay. The calculation is just to complex for this forum, Sorry tried to keep it simple.

Good Luck

[Poker CPA]

Good point about the state, its higher, so need to review each individual state.

Bad preparers try to get you to overpay your taxes, so they can be the BIG hero with refunds. I think the NY DOJ took H&R Block to court over this practice and Block took BATH over it. How's that for LOVE Brother. Make your client pay in taxes so they can be heros. I'll take the hate, thank you.

[1p0kerboy]

PokerCPA,

I know you are probably terribly pressed for time right now, so if you can't reply to my request I certainly understand.

Basically you are saying that you have to pay a penalty for not filing quarterlies, and that penalty works out to be about 4% of the tax owed. If we are hanging onto that money over the course of a year, then (hopefully) our interest-bearing account is pretty much covering this.

I think I have heard you say before that the IRS uses some sort of scare-tactic wording to get players to pay the quarterlies. Can you quote these and explain how they are wrong? (Or if you have done this before then link the thread).

[Zele]

Worth noting that if you are paying exactly what you owe you're probably better off paying quarterlies if your investment strategy is to just dump the money in a money market account or something (or for that matter any kind of regular financial investment - an 8% risk-free return is pretty hard to top). However if you're overpaying you are going to cut into that pretty quickly. I may not quit paying quarterlies, but I think I'm going to pay about half of what I do now. Thanks, Poker CPA.

[Poker CPA]

Thank you Zele

Here's the problem, the accounants, preparers, CPAs and whoever tell their clients its a penalty and they have to pay to avoid this charge. So clients pay and the preparer does'nt have to worry about a client not having the money for next year (and the accountant wants to get paid too). IMO this is "self-dealing". What should happen is the client is made fully aware of the circumstances and the choices spelled out clearly; Option A, pay est taxes or Option B, pay on April 15th. The cost is 8% simple interest vs your own investment choices. Its my clients call here, not mine. Each is different.

Whats criminal about this is the use of the term "penalty". Its a scare tactic and if you overpay, the IRS does not pay interest. What H&R block did is just unbelieveable, and their motto was "plan for a refund".

If your accountant is pulling this crap, then kick him in the azz. Sorry that "hate" stuff again. But this is total IRS BS, if they said "interest only and we don't have to pay you for overpayments" then people would slow down and, God forbid, THINK ABOUT IT.

[Poker CPA]

1pokerboy:

Just about everything in the instuctions that refers to this underpayment charge is called "a penalty", not interest. Yet when you file and/or pay late the real penalites start piling up, you get the "plus interest" BS. These penalties for lateness and nonfiling are very serious. The IRS is trying to confuse and scare you into paying early by making you think of these charges, not the "plus interest".

[FatalError]

i don't understand how some people are using 4% and some people are using 8%, which one is it?

[Poker CPA]

For the year 2006 the interest rate used is 7% and 8%, it depends on the weather. The 4% is a factor used to give you a quick and dirty calculation. Now I'm not very good with math, so Form 2210 last about 10 seconds before it hits the the trash can. Give it a try, the over/under on the trash can is 60 secs. You sound like a reasonable guy, I say 2 hours to complete that form. I like the 2 sec version, 4% times your liablity. Confusion is IRS's best friend and you're the current poster boy? Good Luck.

[zimmer879]

Are you saying 4% because the average time delinquent per estimated payment is about half a year?

[Wynton]

[ QUOTE ]
No big deal. The penalty for underpayment of estimated tax is calculated based on the 8% annual rate right now. This translates into 0.0219187% times number of days late times the amount of the underpayment for the time period in question.

[/ QUOTE ]

This is not what my accountant just told me. Or not the whole story he told me.

I was told that, even if you're a week late, you will be subject to a PENALTY. In addition to the penalty, you also will owe interest, which is not substantial.

[Poker CPA]

zimmer

correct

wynton

get a new accountant

[Poker CPA]

In fact "calle mayor", I'm impressed. Congrats

Interest only Wynton, call it a penalty if you want, but its INTEREST. Get Form 2210 and do the numbers, and then call your accountant. There are no penalties for not paying or paying late. JUST INTEREST.

[Poker CPA]

And the IRS just loves this crap, and its just the tip of the "ice thing"

[Poker CPA]

Zimmer, in addition, the half year calculation is 5.3% (or 5.3 times tax liability, give or take) but an average accountant can get it down to under 4% a fair % of the time.

Hope this helps, if not, get Form 2210. Still confused, its hopeless.

[zimmer879]

An 8% annual rate is significant. IMO unless you are an experienced investor, it would probably be in your best interest to pay estimated taxes as long as you don't go too far over.

[Poker CPA]

Thats a fair conclusion, as long as you know that the IRS will not pay interest on any overpayment.

Please this is not about hate, but simple facts. You must be someone who gets a paycheck, with taxes withheld, and plays poker on the side. You do not like the idea of a payment on April 15th. While most business people (or poker pros) know that they can do better than 8%. And my overall point is, its their choice, not mind. A well informed client, is the best client. If this is your situation, your accountant is a fool.

[zimmer879]

Just to clarify and perhaps I'm stating the obvious at this point but, overall an 8% annual interest penalty is applied to missed estimated taxes. The actual rate is less because each payment is considered delinquent for less than a year. So for example if you miss Q4's payment you will only be charged interest on the 3 months it's overdue, making the actual penalty on that payment approximately 8%/4 = 2%. So for investment comparisons, ignore the actual rate and focus on the annual rate of 8%. CPA if I'm misunderstanding you, let me know.

[zimmer879]

[ QUOTE ]
Please this is not about hate, but simple facts. You must be someone who gets a paycheck, with taxes withheld, and plays poker on the side. You do not like the idea of a payment on April 15th. While most business people (or poker pros) know that they can do better than 8%. And my overall point is, its their choice, not mind. A well informed client, is the best client. If this is your situation, your accountant is a fool.

[/ QUOTE ]

I don't understand some of your comments and I agree that people should be well informed, but I think there was some confusion about the 4% vs 8% rates that were being talked about. I just wanted to clarify. The 8% figure is not to be taken lightly. Many people think they can do better than 8%/yr and if they can or choose to try that's their prerogative. The important thing to remember is that by paying estimated taxes you are essentially earning 8% on that money GUARANTEED, which is next to impossible in the investment world.

[Poker CPA]

Point 1.

Yes the investment calculation is 8%, less the potential loss on an overpayment.

Point 2.

That depends, whats your work situation?

[zimmer879]

[ QUOTE ]
Point 2.

That depends, whats your work situation?

[/ QUOTE ]

I play poker for a living, but I have no idea how that's relevant.

[Poker CPA]

BTW not to many people have "Guaranteed" streams of income. I think your point assumes this fact. This is a poker forum, not a trust fund forum.

[nineinchal]

Isn't it death by lethal injection?

What state are you in? Florida might be electrocution.

[Poker CPA]

So your a poker player and this is not relevant. This I don't understand, do you really understand the estimated tax requirements?

[Poker CPA]

So you win in the 1st and 2nd Qtrs, then go on a 6 month losing whatever. Now what happens to your 8% "Guarantee"?

[zimmer879]

[ QUOTE ]
BTW not to many people have "Guaranteed" streams of income. I think your point assumes this fact. This is a poker forum, not a trust fund forum.

[/ QUOTE ]

It has nothing to do with guaranteed streams of income, it has to do with guaranteed return on investment. If you don't pay the estimated taxes and take that money and invest it, will you come out ahead? You're not going to do much better that 5.5% or so guaranteed in the investment world. Point being, I don't think it would be wise for most people to pass up the 8% guaranteed you're getting by not paying estimated taxes.

[Poker CPA]

No interest on the overpayment needs to be addressed? And cash flow does have a price. There is nothing worse than needing cash, and you overpaid your estimated taxes.

[Poker CPA]

You sound like a Trust Fund guy. They are all over this issue, 99.9% of their clients pay estimates. Which is smart, but guys whose income goes up and down with the weather, 2% or 3% (or 4,5,6) means very little.

Now you might be a poker player with a deal, thats another story.

[zimmer879]

Worse is having the cash, blowing it, and then being indebted to the IRS at a juicy 8% rate.

[Poker CPA]

"It has nothing to do with guaranteed streams of income."

It has everthing to do with steams of income, or cash flow if you like. Please address the "no interest" on overpayments factor?

[Poker CPA]

So if you were my client, its "Better safe than sorry", which is fine. But a Guaranteed 8% requires a Guaranteed income".

Get in the stock market, I've averaged 19% over the last 5 years. Vanguard Healthcare, International fund and Emerging markets. Now thsts juicy

[zimmer879]

I already did. Look, you came into the thread saying it's foolish for anyone to pay estimated taxes. You're wrong. There are exceptional cases where it may be correct for people to do so, i.e they are grossly overpaying their taxes or they are very experienced investors who can beat 8% guaranteed. But for most people it doesn't seem to make much sense not to pay. I've said my piece. People can decide for themselves.

[zimmer879]

[ QUOTE ]

Get in the stock market, I've averaged 19% over the last 5 years. Vanguard Healthcare, International fund and Emerging markets. Now thsts juicy

[/ QUOTE ]

I hope this is tongue in cheek.

[Poker CPA]

I also said this:

"What should happen is the client is made fully aware of the circumstances and the choices spelled out clearly; Option A, pay est taxes or Option B, pay on April 15th. The cost is 8% simple interest vs your own investment choices. Its my clients call here, not mine. Each is different."

I invest in those Vanguard funds, lots of people do. Why would you hope its "tongue-in-cheek". I think lots of 2+2 posters invest there too. Thats my choice.

But be that as it may, your conclusion is "By paying estimated taxes, you get an 8% Guaranteed return". Is this correct?

[Poker CPA]

and BTW "The Royal Bank Of Scotland" is a good buy. Its the #1 stock of the Internationa Fund.

[Poker CPA]

One other thing, for players who have a normal job, don't pay estimates. Adjust your withholding in November and December. You can have your company withhold as much as you want. Good Luck

[zimmer879]

[ QUOTE ]
I invest in those Vanguard funds, lots of people do. Why would you hope its "tongue-in-cheek". I think lots of 2+2 posters invest there too. Thats my choice.


[/ QUOTE ]

What I hoped was tongue in cheek was the notion that your own personal recent stock market returns in any way reflects what you or anyone else will make in the market going forward. 19% returns are not remotely sustainable by ordinary investors. I just hope your recent success in the market is not influencing the advice you're giving to others.

[Poker CPA]

I'm not allow to give investment advice to clients, "Lawsuit City". If you are a serious investor, and don't know about Vanguards HealthCare Fund, you have your head up your azz. Since 1984, its inception, 19% yearly average. Its closest rival is 12% over this same period. Thats almost 25 years. I can't give advice but I can answer questions. For instance, "I know you're from Ireland, but where do invest your money. You appear to be, well too Irish, but you're cute". Looking forward you can't expect double digit returns, but it beats the hell out of 0% on overpayments.

But be that as it may, your conclusion is "By paying estimated taxes, you get an 8% Guaranteed return". Is this correct?

[LotteryOrPoker]

[ QUOTE ]
Real men don't pay estimated taxes. We wait until the last possible moment, MIDNIGHT APRIL 17th. The interest charge is about 4% times times the tax due on April 17th. The IRS likes to call it a penalty, but its just simple interest. So if you owe $10,000 on April 15th, the interest is $400, give or take. And if you pay in to much, the IRS doesn't pay you interest. Real men don't fall for this trick, we invest OUR money wisely. (Except the guys who left it in Neteller).

[/ QUOTE ]

You say some really strange things at times. Real men don't pay quarterly? I think you are forgetting that you have to pay taxes on whatever money you earn. So let's say you invest 100k at 7%. You have to pay up to 35% of that 7k in federal income tax, plus the 4% penalty. That means you are paying $2,450 in federal income tax, 4k in a penalty for a grand total of $6,450. That means you earn a net of $550 IF you are getting a 7% return on your money which requires taking a risk with your money. If you risk 100k to make $550 you belong in a nut house. To even make 5%+ in a money market right now you have to invest in a money market fund that is not FDIC insured, you are still taking a risk and you are still losing money. The assumption that even make a $550 profit requires assuming a number of things work out in your favor EVERY year (like a decent rate of return).

[Poker CPA]

Now that was tongue-in-cheek. Real men know the diference.

But on to the question

Income 7,000
Tax 2,450
Penalty 4,000
Total Cost 6,450

Did I get this right?

[Poker CPA]

The Nut house comment is pure gold.

[Poker CPA]

I get the feeling that you think I'm full of CHIT.

As long as the nut house has poker players I'm there.
Poker is such a wonderful game, you never know who will be there.

[Poker CPA]

Do you play Lottery?

[LotteryOrPoker]

Your assumption is that you will always get a 7-8%+ return. If you invested in NASDAQ in 2001 you are still not at even money today. I don't think you are full of CHIT, I just think you have some unrealistic expectations (at least for a SAFE investment). Why would I take ANY risk to make .550% return? That makes no sense.

[LotteryOrPoker]

And yes, I play poker. This kind of ties into the point. I wouldn't play beyond my limits. From the sounds if you buyin at limits where you have 100-200 bbs, I prefer to stay in the 700-800 bb range, if not 1000. If I am a winning player I can make money over the long term with little risk. Same thing is true with my investment portfolio. When I play poker I am not gambling, when I invest I do not gamble either.

[Poker CPA]

Its my clients choice, not mine. For my own taxes I'm happy to pay April 17th.

Lottery you're making it way to EZ for me. Go get a beer, a smoke, a BJ; I don't care. Then redo the thought process. Maybe I'm wrong but I don't think you'll ever get your head out. A truly amazing thought process on this subject, gee its only the 60th post (give or take, of course)

[Poker CPA]

Where do you play? Oh I forgot, the nut house.

[Poker CPA]

Seriously this is funny, and please no one post to help him.

[Poker CPA]

The penalty is only $160, not 4,000. I know your heart was in the right place, and girls like that; but real men something else comes to mind.

Redemption Time. Here's a common real-life tax situation, see if you can get the right answer (kinda pass/fail).

You make your 7,000 profit on March 15, 2006. So in order to take advantage of your 8% Guaranteed investment, you make the est tax payments in 2006. Now in December 2006 the stock market takes a dive and you have a chance to sell a stock to for a 7,000 loss. Now which choice is best. 1. Sell the stock to reduce your tax to zero, but give up the Guaranteed 8% investment; or 2. wait until January 2007 to sell the loser and lock in your Guaranteed 8% for 2006.

[Poker CPA]

Excuse me, the penalty is $98 (4% times 2,450). I smell Lawsuit

[Wynton]

[ QUOTE ]
In fact "calle mayor", I'm impressed. Congrats

Interest only Wynton, call it a penalty if you want, but its INTEREST. Get Form 2210 and do the numbers, and then call your accountant. There are no penalties for not paying or paying late. JUST INTEREST.

[/ QUOTE ]

I did my accountant a disservice. I remember now that he did not say there was a penalty for paying the estimated taxes late, but just a penalty for paying last year's taxes late. My error.

[boondoggle]

Well pokercpa..i have a 1099-int from the IRS where they paid me interest for my overpayment....lol..I would not take any advice on these forums.

cheers
Boon

[LotteryOrPoker]

[ QUOTE ]
Excuse me, the penalty is $98 (4% times 2,450). I smell Lawsuit

[/ QUOTE ]

Whatever you are smoking, please do not share, it has made you retarded. The 100k was all tax liability reinvested. That is why the 4% penalty was on 100k, not $2450. Wow, I can't believe we even got to this point, you really do not have a clue.

In the scenario I proposed, I invested 100k that that was a tax liability instead of paying it quarterly. I then owe a 4% penalty on the UNPAID LIABILITY which is 100k, not $2450. $2450 was my federal income tax liability on the 100k that had a return of 7%. Wait to finish Accounting I before you post next time.

There is an error in what I did, but you have not caught it. I threw it in there intentionally, just to see how quick you are. If my total tax liability was 100k I would not be in a 35% bracket. That was the only thing you should have pointed out. If you need tutoring help with Accounting I or II let me know.

[LotteryOrPoker]

[ QUOTE ]
Excuse me, the penalty is $98 (4% times 2,450). I smell Lawsuit

[/ QUOTE ]

Let me make this really simple for you, because I have a feeling you will still be lossed. You can impress your Accounting I professor this summer.

You are self employed (as a doctor) and make $1 million in fiscal year 2006. That puts you in a 35% federal income tax bracket. That makes your federal income tax liability $350,000.

Instead of paying that $350,000 quarterly, you invested it at a rate of 7% (at 7-8% you are taking a risk. you are taking a risk at 5%+ in a money market that is not FDIC insured, much less a mutual fund earning 7-8%+ when blue chip stocks are not performing).

At the end of that year you owe a 4% penalty (roughly, depending on a number of other factors, but for fun lets say 4%). At 7% on 350k you earned $24,000 (in actuality it is FAR less than that because you didn't have the entire 350k invested all year, only as you made it .. so your actual investment dollars are FAR FAR FAR less). Okay, but lets say you did make 24k because all of your income was made in the first week of the year and the rest sucked (all $1 million). Then you got this great 7% return. You still owe another 35% FEDERAL INCOME TAX on that $24k. That turns that 24k into $15,600. Then you owe 4% penalty on 350k, which is another $14,000.

That means your liability is $29,600. You earned $24,000 off of the money that you should have paid quarterly. You ended up in the red earning 7% on your money! Too bad you would never make that much because chances are you made that 350k throughout the year so your actual investment much smaller (same reason you don't owe 8%).

Dude, get off the pipe. Do you honestly think you are smarter than every lawyer, accountant and everyone else who is self employed paying in quarterly? Do you honestly believe you figured out something everyone else doesn't know about? Most successful, self employed people hire CPA's. If it was in their best interest to invest money instead of paying in quarterly they would. There is a reason they don't which I just stated. Don't give advice in a public forum before you finish with your associates.

[LotteryOrPoker]

If truth be told you have to end up at 11.5% roi just to break even because just like you don't owe 8% on the total liability, you don't have the total liability to invest through out the year (it grows the more you make as the year progresses). I let the numbers error in YOUR favor to prove a point. If anyone is willing to invest 100k that requires a 12.5% roi to make a thousand bucks they deserve to lose their fundage.

[Poker CPA]

You're assuming the doctor knows exactly what he will be making in 2006 on April 15th, 2006, June, Sept and so on. Thats not the real world. There are some cases he knows that he will make even more, and if he has good cash flow then EZ choice. Again his choice, not mine.

Now if he is not sure of his income, and he pays to much, he loses. For example, he could be expanding his practice and he's not sure of his income, then what? In other words, if he makes that April 15, 2006 payment thinking he'll make $350,000 but only makes 200,000, then what? The word estimate means exactly that. If the estimate is to high you loss the investment and cash flow game, and too low you lose the interest charge. Most businesses are under capitalized, and will go for cash flow. The thought of not making payroll is a tough thing to handle.

As I said earlier, if you had a Trust Fund this issue is "Cut and Dry". Same for the guy who is a wise investor, its a big joke to him, he's keeping his money. But if you're running a business and cash flow is important then the 8% is pretty cheap. Its a roll of the dice. Businessmen live and die on cash flow, and sure as hell they are not in it for the 8%.

Things more related to poker; retirement plan funding, do you make a retirement contribution or an estimated payment. I think this is EZ, retirement plan wins everytime. If a poker player makes consistently 350K, then fine pay estimates. But what about the guy making under the SS limit, its not so EZ for him. Bottom line, he'll do what's necessary, the 8% is cheap. The 0% on overpayments is a big negative. Its not a perfect world, chit happens, and if the IRS has your cash than its your tough luck.

BTW option A or B


And I did ask if I had the facts right.
Income 7,000
Tax 2,450
Penalty 4,000
Total Cost 6,450

Did I get this right?

[LotteryOrPoker]

Your CPA's "estimate" is based off of the previous years earnings. Yes, that is 100% cut and dry, just like a trust fund. You determine the amount you are paying in quarterly based off of the previous year.

PUT DOWN THE PIPE! The real dollar roi to just break even is closer to 11.5%. There is nothing that isn't cut and dry about that. Anyone who is willing to risk 100k at 12% to make a $500 profit is nuts.

[Poker CPA]

Boon- Congrats

Maybe you can share with us how you accomplished this. Did you fill out a tax form for the calculation? What was the interest rate? For underpayments taxpayers fill out Form 2210. What form did you fill out for the overpayment? There must be one, the IRS is fair.

The IRS will not pay interest on overpaid estimated or payroll withholding taxes on returns filed by April 15th and processed in a timely fashion by their service centers. Timely, I think is by June 1st or 45 days. If the June 1st date is not met, its Miller Time. The interest is calculated from June 1st to the time they process the check (I could April 15th, but I doubt it)

Now if you still believe that IRS pays more than 0%, say 8% to be fair, then take your savings and overpay your estimated taxes. Pretty Cool.

BTW did anyone get interest on a refund for the year 2005, that was processed timly by IRS. IRS Issues MILLIONS refund checks, so guess there's a 1099 for each one. Boon got his, did you get yours?

[Poker CPA]

And if you overpay Lottery, what then? I think it affects the result just bit

[LotteryOrPoker]

If I overpay I overpay. Then I get a refund and I have peace of mind. I don't expect to receive a 12% roi year in and year out. I am certainly not investing in 12% funds (medium to high risk) for a $500 return on a 100k investment, lol.

[LotteryOrPoker]

[ QUOTE ]
I think it affects the result just bit

[/ QUOTE ]

effects.

[LotteryOrPoker]

[ QUOTE ]
And if you overpay Lottery, what then? I think it affects the result just bit

[/ QUOTE ]

Because the verb is causing the result, not influencing it, you mean to use effect, not affect. /images/graemlins/smile.gif

[Poker CPA]

And if the previous years earnings are more than the current year, then what? I'm sure you've had previous years earnings more than current year. Most people have, and most certainly poker players. They can have wild swings. My point is, there is nothing worse than paying estimated taxes and then getting refunded your overpayment. Insane, unless you still believe the IRS pays interest on the overpayments. Good Luck and did you take into consideration the safe harbor rules in your ROI.

[Poker CPA]

as in tax effect

thanks

[LotteryOrPoker]

You can adjust your earnings mid year if you are doing better or worse. This is all basic accounting 101, zzzz.

[Poker CPA]

Wait a minute, I just reread your original post. You did say 7k income, 2,450 tax, 4,000 penalty. Please restate the facts? Is the 100k the quarterly tax payment or the total tax? Lets assume est tax. lets further assume 15% rate and when you file the return you have a 20,000 refund. Now what?

[Poker CPA]

Can't forgot the safe harbor rules. An extra 10%(maybe 8) over the previous year. 15% is OK, dividend and LT cap rate. You know sell a stock in your account, to pay taxes. Now what?

[Poker CPA]

Your ROI is shrinking, pretty fast too.

[LotteryOrPoker]

[ QUOTE ]
Wait a minute, I just reread your original post. You did say 7k income, 2,450 tax, 4,000 penalty. Please restate the facts? Is the 100k the quarterly tax payment or the total tax? Lets assume est tax. lets further assume 15% rate and when you file the return you have a 20,000 refund. Now what?

[/ QUOTE ]

Eh, go read previous posts in their entirety. I said you may get confused so I laid out an entire scenario. If you read it I think you MAY understand.

BTW, don't you have driver's ed before school tomorrow? You may want to get to bed! Don't want your mom to walk in on you staying up this late. Oops, she probably doesn't go to the basement at this time of night!

[LotteryOrPoker]

[ QUOTE ]
Wait a minute, I just reread your original post. You did say 7k income, 2,450 tax, 4,000 penalty. Please restate the facts? Is the 100k the quarterly tax payment or the total tax? Lets assume est tax. lets further assume 15% rate and when you file the return you have a 20,000 refund. Now what?

[/ QUOTE ]

7k income on the tax liability reinvested. That is 4k penalty on the 100k, 35% income tax on the 7k earned at 7%. Please tell me you are not really this daft. I am losing faith in the future generation!

[Poker CPA]

Please redo, the 35% is little much. and the safe harbor. and the potential 20K refund. All negatives to your ROI, but very realistic to the real world.

[LotteryOrPoker]

[ QUOTE ]
Please redo, the 35% is little much. and the safe harbor. and the potential 20K refund. All negatives to your ROI, but very realistic to the real world.

[/ QUOTE ]

35% depends on your federal income tax liability. In the example I gave you are at 35%. Please look up federal income tax tables.

You came into this thread making generalizations about "real men." Real men with a low tax liability may benefit from this (although in reality they would be harmed the most from trying this) on paper, "real men" with a high tax liability don't benefit from reinvesting the money and taking the penalty.

Someone may read this thread and believe you are actually a CPA. That person may end up following your advice. You need to know what you are talking about before you give advice in a forum that thousands of people read. What you are doing is wrong.

[Poker CPA]

Try this, I sell a losing stock in Decemeber, get the tax benefit in the current year. The appreciation of another stock, purchased with IRS estimated payments, is tax free. The tax benefit of the realized capital loss goes to pay the interest charge. Whats my ROI now.

[Poker CPA]

Try this, file a 2006 extension and pay any tax due along with your April 15th and June 15th 2007 estimated payment. Wait until September 15th, determine your 2007 income to date, apply your 2006 refund to your actual 2007 year to date tax liabilty, refund any overpayment of 2007 estimated tax

[LotteryOrPoker]

[ QUOTE ]
Try this, I sell a losing stock in Decemeber, get the tax benefit in the current year. The appreciation of another stock, purchased with IRS estimated payments, is tax free. The tax benefit of the realized capital loss goes to pay the interest charge. Whats my ROI now.

[/ QUOTE ]

Why not float some sub prime paper while you are at it. If you bring this up in your Accounting I class this summer you will fail little grasshopper! Stick to the facts at hand and don't confuse yourself!

[Poker CPA]

Try this, a player does his tax calculation at the end of November and then tells his employer to increase his witholding during the month of December, and the interest charge goes away. Whats his ROI.

[Roman]

lol taxes are too confusing

[mo42nyy]

how the [censored] is the second payment due on june 15th
am i missing something? shouldnt it be july ?

[broiler]

You aren't missing anything. The second quarter for estimated taxes only covers the months of April and May, therefore making the second payment due on June 15th.

[Poker CPA]

The fiscal year end of federal, state and local entities is usually June 30th and they have cash basis accounting systems. We're lucky it isn't Jan 15th, Feb 15th, Mar 15th and Apr 15th.

[broiler]

You need to move to NY where no governmental entity has the same year end. We have the Federal fiscal year that ends in September, State ends in March, the localities end in August or December. The only thing that we have with a June year end are the school districts.