profitable

The taxpayer is not required to pay the final installment if he files his tax return and pays the entire balance due on or before January 31 of the next year. Qualified farmers and fishermen (defined earlier) may elect to wait until January 15 of the following year to file Form 1040-ES and pay their entire estimated tax at that time. Or, if they file Form 1040 and pay their entire tax on or before March 1, they are not required to file Form 1040-ES or pay estimated tax.

The taxpayer can receive their estimated tax vouchers from their Tax Professional or they can go online and get them from www.irs.gov.  On or before the due date of each installment, the taxpayer should mail the voucher for that date and a check or money order to the appropriate IRS address. If a Form 1040-ES is filed at the same time  as the Form 1040, the taxpayer must pay the estimated tax and any balance due on Form 1040 with separate checks or money orders and mail each in a separate envelope to separate places. The taxpayer should write his social security number and what the payment is for (for example, “2008 Form 1040” or “2009 Form 1040-ES”) on every check or money order sent to the IRS. Checks and money orders should be made payable to “United States Treasury.”

All or part of an overpayment of tax on the 2008 tax return may be applied to the 2009 estimated tax rather than being refunded, if the taxpayer so chooses. The overpayment may be divided equally among the required installments or applied in full against the first installment and any remainder to succeeding installments until used up, or applied in some other way that fits the taxpayer’s situation. The overpayment applied from 2008 is not shown on the voucher; only the actual amount paid should be shown.

Changes in income, exemptions, deductions, and credits during the year may increase or decrease the estimated tax. An increase in estimated tax should be paid on or before the next installment due date

or in appropriate amounts on or before each remaining due date. If there is a decrease in estimated tax, remaining installments may be reduced or even eliminated.

Oct 19 2009 Mid Day

More on How and When Do I File Quarterly Tax Payments Kim G?

I am not a huge fan nor believer that we have gotten out of the woods financially.  Business is just moving too slowly and I don’t see any recovery in manufacturing in this country.  We still have millions under if not unemployed.  The stock market looks like it is going to open a little higher today on earnings reports and when I see that some companies are showing better profits, I like to look to see if they are from one time or one off discharges of expenses or liabilities.

Like more layoffs to save money.

Please do what you can to stay afloat financially and read between the lines, gang to get to the truth to the situation of corporate earnings.

Talk with you again in a few hours.

Oct 19 2009 early am

Kim Isaac Greenblatt

Oct 19 2009 Market Looks To Open Higher

A payment voucher for estimated taxes, Form 1040-ES, should be filed on the first estimated tax due date after the receipt of income not subject to withholding. If income is received in essentially equal or appropriate based on what your state may want to see (See California for example for accelerated payments) amounts throughout the year, the first declaration should be filed on or before April 15.
Period Due Date:
* Maximum Requirement of Number of First Met Declaration Installments
Between January 1 and March 31 April 15              4
Between April 1 and May 31 June 15                   3
Between June 1 and August 31 September 15            2
After August 31 January 15                            1
* These dates are extended to the next regular business day if they fall on a Saturday, a Sunday, or a legal holiday. A voucher may first be required on a due date after April 15 if the taxpayer has an increase in taxable income after March 31 from such things as:
• Realizing a taxable gain from the sale of property
• Winning a prize
• Starting a business
• An increase in profits of an existing business
• A change of filing status
• The loss of an expected dependent exemption
The full amount of the estimated tax may be paid when the first Form 1040-ES voucher is filed. Or, if the first voucher is due April 15, one fourth the total payment may be made at that time; if the first voucher
is due June 15, one-half of the total must be paid then; if the first voucher is due September 15, three-fourths of the total must be paid then.
Example: Harry Smith’s first voucher is due September 15, 2009.
His total estimated tax is $1,804. He should pay $1,353 [$1,804 * ¾] with his first estimated payment voucher.

If equal installments are to be paid, you should always round up when calculating each estimated tax payment. This little extra could mean the difference between owing and not owing a penalty.

Example: Jane Garr’s first voucher is due April 15, 2009. Her estimated tax is $1,458. [$1,458 / 4 payments = $364.50] It would be a good idea to round each of her payments to $365, for a total of $1,460.  If she only pays $364 each installment, her total payments will be only $1,456, and she could end up owing a small balance due at tax time.

Oct 19 2009

Kim Isaac Greenblatt

Kim G When Should I File Quarterly Taxes

Rex, a student, asked me, “What is basis?”

My response is that  basis is a measure of the taxpayer’s investment in property for tax purposes. One tax purpose for which basis of property is used is to determine taxable gain or deductible loss on Schedule D when the property is sold or exchanged.
For purchased property, which is the way most investment-use and personal-use property is acquired, the basis of the property is its cost. Cost includes the cash paid, the fair market value of services rendered, and the fair market value of property traded in exchange for the property. Also, certain closing costs are added to the basis of property. Such closing costs include commissions paid by the purchaser, legal fees, recording fees, and state transfer taxes on real estate.

Example: Nancy Lewis purchased a rare stamp for $800. Her basis in the stamp is $800. She also purchased a house for $80,000 plus $3,000 in legal fees and recording fees. Her basis in the house is $83,000. 

During the period the taxpayer owns the property, various events may occur that affect the taxpayer’s investment in the property. As a result, the taxpayer must calculate the adjusted basis of the property before gain or loss can be established.
Adjusted basis is the original basis:

• Plus
 The cost of improvements
 The cost of restoration after a casualty
 Assessments for local improvements
• Minus
 Any discount, rebate, or reimbursement of any portion of the purchase price
 Insurance reimbursements for property damages
 The amount of casualty or other losses deducted on the return for any year
 Depletion or depreciation allowed or allowable
 Any gain that is not reported in the year realized

It is important to track your basis in business and personal transactions.  Hope that helped, Rex, and thanks for asking.

Oct 18 2009

Kim Isaac Greenblatt

Rex Asks Kim What is Basis

Miranda, a potential client, asked me the other day, “What the heck are capital assets?  I have heard about them and I don’t understand the definition.”

My answer is that I don’t blame Miranda because the definition is one of those that uses the definition in the explanation.  And you wonder why tax law is weird.  Back to business.

Generally, everything you own or use for either personal purposes or investment purposes is a capital asset.  The tax Code defines capital assets in negative terms: In fact, under the Internal Revenue Code, all property is considered a capital asset except for the following types of property.
The following assets are not capital assets:
• Property held mainly for sale to customers or property that will physically become part of merchandise for sale to customers. This includes stock-in-trade, inventory, and other property you hold mainly for sale to your customers in your trade or business.
• Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of any properties described above.
• Depreciable property used in your trade or business or as a rental property, even if the property is fully depreciated (or amortized).
• Real property used in a trade or business or as rental property, even if the property is fully depreciated.
• Copyrights, literary, musical, or artistic property created by personal efforts and prepared or produced for (or, under certain circumstances, acquired by) the taxpayer.
• U.S. government publications received from the government for free or for less than the normal sales price.
• Certain commodities and derivative financial instruments—which you will seldom encounter. (Derivative financial instruments are financial contracts whose value depends on–and is derived from–the value of an underlying asset, reference rate, or index.)
• Certain hedging transactions that are entered into in the normal course of a trade or business—which you will seldom encounter. (A hedging transaction is any transaction entered into primarily to manage risk of price changes or risk of interest rate or currency fluctuations.)

Starting to make sense or more confusing?  Wait, there is more.

• Supplies of a type you regularly use or consume in the ordinary course of your trade or business.

Properties in the following use classes are capital assets:
• Personal use, including personal residences, vacation dwellings, cars, furniture, jewelry, hobby and recreational equipment, collections, etc.
• Investment use, including land, stock, municipal and corporate bonds, collectibles, antiques, etc.
• Business use, including only certain intangible personal type property, such as goodwill or a franchise, plus any net §1231 gain from Section 1231 transactions are not discussed in this posting right now. If you see sales of business use property, you will need to do further research.

Take a look at Publication 544, Sales and Other Dispositions of Assets for more info that might help you with wrapping your head around the topic.

Oct 17 2009 mid day

Kim Isaac Greenblatt

Miranda Asks Kim What Are Capital Assets

Individuals are considered married if they were legally married and not legally separated under a decree of divorce or separate maintenance  as of the last day of the tax year. This provision includes common-law marriages if such marriages are recognized by the state where the marriage began or by the state where the couple resides.

A married couple may choose to file a joint return or separate returns.  A joint return often results in a lower federal tax. If separate returns are filed, the effective tax rates are generally higher and several deductions and credits are reduced, limited, or not allowed at all. Whether the couple files jointly or separately, each spouse must report the social security number of the other spouse in the heading of Form 1040A or Form 1040. On a joint return, the spouse’s name is entered in the heading; on a separate return, the spouse’s name is entered next to line 3.

The total income, exemptions, and deductions of both spouses must be included on a joint return, and they must use the same accounting period. Usually, the spouses can be held liable, together or individually, for the entire tax plus any penalties on a joint return.

As you have already read from my previous blog entry, a married person who dies during the year is considered married for that tax year. The surviving spouse is also considered married for that tax year. If the surviving spouse does not remarry before the end of the year, a joint return or separate returns may be filed.  A surviving spouse who does remarry may file a joint return with the new spouse or they may file separate returns. The filing status of the deceased taxpayer in such a case must be married filing separately.

Example: Jack and Jill were married. Jack died on January 27, 2008. On December 1, 2008, Jill married Peter. Jill  and Peter  may file a joint return, or they may file separately, whichever they choose.  Jack’s filing status is married filing separately.
The decision whether to file a joint return or separate  returns should also take state tax laws into consideration.  In many states, the filing status on the state return must follow that on the federal return. If state tax laws are less restrictive for the married filing separately status in your state, the larger federal tax liability may be more than offset by a smaller state tax liability.

A taxpayer who files a joint return and later learns that the other spouse has understated the income (or overstated a deduction or credit) on the return may qualify to request innocent spouse relief from the IRS. For more information, see IRS Publication 971 or the instructions for Form 8857.

Be safe and sane, people!  Makes for better business and quality of life.

Oct 16 2009

Kim Isaac Greenblatt

More On Married Filing Jointly Separately