Re: quick tax help
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Sorry about the mailbox.
Your 4 2006 estimated payments $ 200,000
Your est of 2006 April 17th liability 100,000
Total 2006 300,000
Your 2007 1st Qt est payment (safe Harbor) 82,250
Your 2006 extension payment is 182,250
Your 2007 1st est payment (due April 17th) is ZERO
So you should send a check for 182,250 with the extension, if your actual total liability comes in at $301,000, then you will have a refund of $81,250. You than apply this refund to your 2007 taxes. Send it to your local 1040 IRS center (Ogden, Fresno or whereever), not the Est tax center (which is Cinn OH I think). This protects you against underpayment penalties on the 2006 extension, but maybe cause a slight interest change in 2007. And thats a big MAYBE. Good Luck and you need Form 4868, its simple.
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PokerCPA,
Usually this works nicely. But...
Taxpayer makes 2nd & 3rd Qtr est tax payments of $82,250 each
Total est taxes paid for 2007 - $164,500
Tax on the 2006 return when filed - $140,000 instead of expected $300,000
Taxpayer wants the $242,250 refund (2006 est tax pmts $200,000 + 2006 ext pmt $182,250 - 2006 actual tax $140,000) in cash thinking that his 2007 estimated tax payments already cover him for 2007, so there's no reason not to get some cash back
Resulting 2007 1st qtr est tax paid in - $0
Penalty for underpayment of est tax = roughly $140,000 x 110% x 8% x 2mo/12mo = approx $2,000
This is nothing to your client, but if he notices and asks you what happened, you look like a pile of douchebags.
And yes, many wealthy clients have no idea what large deductions they are entitled to. So the drop in anticipated tax from $300,000 to $140,000 is more common than it would seem.
Sorry, this must be the most unimportant post in relation to poker, but the math is worth noting.
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