Help me understand quarterly payments to the IRS

[LuckyDevil]

What are the benefits of making payments quarterly? Am i required to do so as a pro poker player? Will i end paying more in taxes if i simply wait and pay them all at once at the beginning of the new year? Thanks.

[Fat Nicky]

from my understanding, quarterly payments are not mandatory, however, if you do not pay them, you may owe interest to the IRS. i could be totally wrong though, and fwiw, this is my first year filing as a pro, and I plan on making an estimated payment to the IRS for the first quarter this week.

[Zele]

If have to write the IRS a check on April 15, you also owe interest and penalties, unless you satisfy a bunch of conditions (you are only on the hook for penalties up to your previous year's tax, for instance). The way to avoid interest and penalties is to make quarterly payments.

[jlkrusty]

If you don't file quarterly taxes, you can get penalized. However, it is my understanding that you only half to pay as much as you paid the previous tax year. So, suppose you file your taxes for 2006, and show that you owe $8,000. You pay your $8,000. In addition, you should now pay $2,000 every quarter ($8,000 divided by 4). If you don't, you will pay extra in interest and penalties.

***Disclaimer: I am not a CPA. You should not rely on what I am saying. Talk with your CPA for tax advice.

[FatalError]

all self employed people and those who do not have taxes removed from their paycheck pay estimated 4 quarterlies equal to 110% of your prior years total tax.

[Fat Nicky]

[ QUOTE ]
all self employed people and those who do not have taxes removed from their paycheck pay estimated 4 quarterlies equal to 110% of your prior years total tax.

[/ QUOTE ]

is this true even if 2007 is the first year as filing as self-employed and our 2007 income will surpass out 2006 income?

[BGnight]

I'm filing as a hobby and pay quarterly on a 1040 es form. I'm also netting my wins at the end of the year. My CPA knows this and seems to think it's fine. I plead ignorance until the IRS says something. I'm paying my taxes, so I don't care if I'm not claiming my gross winnings and deducting losses. That just screws online players. And no, I'm not going to jail either. lol.

[Poker CPA]

There are no penalties, just an interest payment. It comes out to about 8% on an annual basis. Its confusing and the IRS tries to scare the crap out of you with their "mumbo jumbo" wording. THERE IS NO REQUIREMENT TO PAY ESTIMATED PAYMENTS.

To do a quick calculation of the interest (the IRS calls it a penalty), its 4% times tax due, give or take.

The scope of your question is to broad to give a complete answer, in this type forum. But if your tax is $5,000, just pay on April 15th. The interest will be about $200, which I'm sure you can makeup on prudent investing or cardplaying.

This issue is EZ for an experienced preparer, but its just to complex to explain in full. I hope this helps.

[Poker CPA]

And if you overpay, they don't pay you interest. Sweet guys.