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    estimated taxes

    taxpayer paid less than $1000.00 in income taxes for many years......will owe about 3000 this year because of trust income he has no way to reduce this amount and average it out....so if a small business or farmer does not have to pay penalty in like situation would this apply to an individual that is retired and has no salary, all retirement income dividends interest and pensions. This, I am sure will be only year of this type of income. thanks for any advice you can give me.

    #2
    They can change their withholding instructions on the pension income for the remainder of this year, then change it back in Jan 2010. Any withholding showing on a 1099-R is considered to have been paid in during the year in equal installments, so the estimated tax penalty would not apply if the withholding equals or exceeds last year's tax liability. Whatever they owe over and above the amount of last year's liability can just be paid when the return is filed without any penalty due on that amount.

    If that's too much trouble for them to go to, then I'd tell them not to worry too much about it. The estimated tax penalty is only going to be about $100 or so anyhow.
    "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

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      #3
      so what u are saying is

      that an individual does not have same option to pay 100% of last years tax liability to avoid the penalty like a small business or farmer??is that right

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        #4
        use of prior year tax to determine estimated tax reqt.

        Originally posted by mona l View Post
        an individual does not have same option to pay 100% of last years tax liability to avoid the penalty...?
        An individual can pay 100% of the prior year tax liability in equal installments and there will be no estimated tax penalty. However, if the prior year AGI was more than $150,000, then the individual has to pay 110%, not 100%, of the tax liability from last year.

        There are some more generous requirements, which reflect the seasonal nature of their income, for farmers and fishing persons than for other individuals.

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          #5
          Halfway Gone

          Originally posted by mona l View Post
          that an individual does not have same option to pay 100% of last years tax liability to avoid the penalty like a small business or farmer??is that right
          Mona, we're not saying that. However, the IRS measures estimated tax penalties by the quarterly installment, and the April 15th and June 15th installment dates have already passed. Your client can pay in GOBS of money in the Sep 15 and Jan 15 installments and STILL be penalized for Apr 15 and Jun 15, EVEN IF HE GETS A REFUND!!

          John's point is that withholding on a 1099-R is deemed to be paid in evenly over the course of the year from January 1, even if all the withholding occurred on the rear end. I have one client who pays himself a $50,000 bonus every December 30th, and has almost ALL of it withheld, and this withholding is deemed to have been paid in evenly over the course of the year.
          Last edited by Corduroy Frog; 07-18-2009, 01:39 AM.

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            #6
            est taxes

            so ok I see what u are trying to explain......to have pension reduced by withholding amount needed. I guess his taxes would not be so extreme if he did not have to now add back of social security to income......is Obamma ever going to see this issue and give the srs a break like the child credit etc for younger people. oh well I do thank all of you for all your input.

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              #7
              hey someone has to pay taxes...ya plan ahead, like increasing the withholding, and no big tax bite. You get more money, you pay more taxes. Happens to me, happens to you, why should it not happen to seniors.

              And as for child care, I'm tired of my taxes supporting breeders! Them little runts better be paying my Social Security in 16 years!

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                #8
                Originally posted by mona l View Post
                so ok I see what u are trying to explain......to have pension reduced by withholding amount needed. I guess his taxes would not be so extreme if he did not have to now add back of social security to income......is Obamma ever going to see this issue and give the srs a break like the child credit etc for younger people. oh well I do thank all of you for all your input.
                I sometimes remind my seniors who find they must pay tax on their SocSec that they are the lucky ones. Many seniors don't have enough non-SocSec income to have to worry about taxes, so if you're going to have a problem it's better to have this one. Not that I completely agree with the tax rates, threshholds, etc, but sometimes this helps gain some perspective.
                Last edited by JohnH; 07-19-2009, 08:40 PM.
                "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

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                  #9
                  Taxes on SS

                  Originally posted by JohnH View Post
                  I sometimes remind my seniors who find they must pay tax on their SocSec that they are the lucky ones. Many seniors don't have enough non-SocSec income to have to worry about taxes, so if you're going to have a problem it's better to have this one. Not that I completely agree with the tax rates, threshholds, etc, but sometimes this helps gain some perspective.
                  always seem to surprise my senior clients. And me too -- after all, it's only been around, what? 20 years? 30? (I'm bad not to change with the times). But I do miss the old days when it wasn't taxable, and especially so since I began drawing it. As to getting the tax paid, most of mine have SSA hold it out -- the rest simply ignore it until April 15th.

                  Guess Joanie's right though 'cause when we oldsters moan about taxation of "money we've already paid taxes on", that's not exactly correct. An SSA rep once told my seminar class that the average recipient recovered all contributions within three years and after that it was gravy.


                  Bachelors should be heavily taxed. It's not fair that some men should he happier than others. -- Oscar Wilde
                  Last edited by Black Bart; 07-19-2009, 11:10 PM.

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                    #10
                    Gordian Knot

                    The question of what if any income should be exempt from tax is a thorny one on which it would be difficult to reach consensus. Welfare is tax exempt because of sympathy for the poor and municipal bond interest is exempt to save state and local government on interest expenses when they borrow. Insurance proceeds are generally not taxable and I have no idea why. Some money from lawsuits and threatened law suits is deductible in order to encourage the relevant complainants to sue. I can personally understand why people who are drawing income from Social Security and any other sources in which they invested taxed dollars feel that it is unfair to tax them on what they take out. At the same time I can see why people who have wages or are self employed or have pensions that were supplemented or even totally paid for by their employers would think themselves badly used if only they paid income taxes.

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                      #11
                      Originally posted by mona l View Post
                      so ok I see what u are trying to explain......to have pension reduced by withholding amount needed. I guess his taxes would not be so extreme if he did not have to now add back of social security to income......is Obamma ever going to see this issue and give the srs a break like the child credit etc for younger people. oh well I do thank all of you for all your input.
                      Send Obama an e-mail to make him see.

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                        #12
                        After seeing an SSA-1099 for $21,300 I thought I'd compare that to wages. In OR a single person under 65 non-itemizer with no dependents would have to have wages over 27K to arrive at the same net.

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