Time to Start on 2017 Taxes

[rapmarks]

If we pay no taxes for 2017 returns, does it mean we do not need to prepay tax for 2018 even though there will be quite a bit of taxes, under rule (3)?

That is a tough question, I don't think I would try no taxes

 

[Talent312]

My reading of the IRS publication says that, if your 2017 tax liability is -0-, there will be no underpayment penalty in 2018.
But I'm not a CPA, and I suggest asking one.
.

 

[VacationForever]

My reading of the IRS publication says that, if your 2017 tax liability is -0-, there will be no underpayment penalty in 2018.
But I'm not a CPA, and I suggest asking one.
.

We do intend to ask our CPA. Thanks!

 

[rapmarks]

Just received a corrected 1099 from 2016!

 

[Talent312]

Just received a corrected 1099 from 2016!

Damn. That's rich. Will it change your tax liability?
.

 

[rapmarks]

Actually I would get some back, but I don't think it is worth the bother.

 

[GetawaysRus]

Maybe it's time to finish 2017 taxes.

Any other Californians here? I'll vent a bit about the California (State) Franchise Tax Board (FTB).

I mailed my Federal and State returns on March 23. This was earlier than usual for me, but I keep reading that it's best to get your tax returns in early to lessen the risk of identity fraud. I always purchase a Certified Mail receipt for each tax return from the USPS so that I have proof of delivery.

My Federal return was delivered within just a few days and I printed the proof of delivery from the USPS website.

But the darn California FTB has still not taken delivery of my state return. Today is the 18th calendar day after I mailed the return. When I check the USPS website, it shows that the package has been delayed and is "in transit." This is ridiculous. I think the FTB must have a ton of returns sitting in a large mail bin and they just aren't finalizing delivery. I know that people complain about the USPS, but they hardly ever lose mail. This delay is because of the FTB.

This very same thing happened last year. Last year I got concerned that perhaps the package was lost, so I mailed a duplicate return. Then I later got proof of delivery for both mailings via the USPS website. I'm getting concerned again, but this year I'm going to sit tight.

I could go on, because the FTB has made multiple tax-related mistakes in the past. (I've gotten numerous letters over the years claiming that I made a mistake and owe them more money. But it has always been the state's error. I have to mail them back with proof and explain politely, but firmly, how stupid they are.) With all that money that I send them in taxes, you'd think that they could afford to provide better service.

 

[SmithOp]

If the same thing happens every year perhaps you should consider using e-File. I’ve e-Filed over 300 CA returns this year and received acknowledgements within an hour.


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[bogey21]

I agree with the suggestion to e-File both Federal and State returns. Not only do you get almost instantaneous proof of acceptance but you know your return has been checked for obvious errors. I've been e-Filing for about 20 years now. Never a hiccup and never been audited.

George

 

[Conan]

Taxpayers must pay their taxes throughout the year either through payroll withholding or by making quarterly estimated payments; otherwise, tax underpayment penalties are assessed. However, underpayment penalties are avoided if any of the following situations apply:

1. Small balance due after federal income tax withholding: The tax, after reducing it for federal income tax withheld, is less than $1,000 (Sec. 6654(e)(1)).
2. No prior-year tax liability: The taxpayer had no tax liability for the prior tax year, was a U.S. citizen or resident for that entire year, and the prior-year return, if the taxpayer was required to file one, was for a full 12 months (Sec. 6654(e)(2)).
3. Exception 1 — using prior-year tax: For installment payments made for 2017, a taxpayer with 2016 adjusted gross income (AGI) greater than $150,000 ($75,000 if married filing separately (MFS)) paid through withholding and/or timely estimates an amount equal to 110% of the prior-year (2016) tax liability (Sec. 6654(d)(1)(C)(i)). For taxpayers with 2016 AGI of $150,000 ($75,000 if MFS) or less, the safe harbor is 100% of the 2016 tax. The taxpayer must have filed a prior-year return for a full 12-month tax year showing a tax liability. A late-filed return does not preclude a taxpayer from taking advantage of this exception; payments may be based on the tax indicated on a late-filed prior-year return (Rev. Rul. 2003-23).
4. Exception 2 — 90% of current-year tax: The taxpayer paid through withholding and/or timely estimates an amount equal to 90% of the current-year tax (Sec. 6654(d)(1)(B)(i)).
5. Exception 3 — annualization method: The taxpayer paid through withholding and/or timely estimates an amount equal to 90% of the current-year tax computed based on annualization of actual year-to-date income for each quarter of the year (Sec. 6654(d)(2)).
   
   https://www.thetaxadviser.com/issues/2018/mar/minimizing-estimated-tax-payments.html

 

[bluehende]

Taxpayers must pay their taxes throughout the year either through payroll withholding or by making quarterly estimated payments; otherwise, tax underpayment penalties are assessed. However, underpayment penalties are avoided if any of the following situations apply:

1. Small balance due after federal income tax withholding: The tax, after reducing it for federal income tax withheld, is less than $1,000 (Sec. 6654(e)(1)).
2. No prior-year tax liability: The taxpayer had no tax liability for the prior tax year, was a U.S. citizen or resident for that entire year, and the prior-year return, if the taxpayer was required to file one, was for a full 12 months (Sec. 6654(e)(2)).
3. Exception 1 — using prior-year tax: For installment payments made for 2017, a taxpayer with 2016 adjusted gross income (AGI) greater than $150,000 ($75,000 if married filing separately (MFS)) paid through withholding and/or timely estimates an amount equal to 110% of the prior-year (2016) tax liability (Sec. 6654(d)(1)(C)(i)). For taxpayers with 2016 AGI of $150,000 ($75,000 if MFS) or less, the safe harbor is 100% of the 2016 tax. The taxpayer must have filed a prior-year return for a full 12-month tax year showing a tax liability. A late-filed return does not preclude a taxpayer from taking advantage of this exception; payments may be based on the tax indicated on a late-filed prior-year return (Rev. Rul. 2003-23).
4. Exception 2 — 90% of current-year tax: The taxpayer paid through withholding and/or timely estimates an amount equal to 90% of the current-year tax (Sec. 6654(d)(1)(B)(i)).
5. Exception 3 — annualization method: The taxpayer paid through withholding and/or timely estimates an amount equal to 90% of the current-year tax computed based on annualization of actual year-to-date income for each quarter of the year (Sec. 6654(d)(2)).
   
   https://www.thetaxadviser.com/issues/2018/mar/minimizing-estimated-tax-payments.html

I have used exception 3 a few times. Easy to understand and follow.

 

[Talent312]

I filed in February. It was a major relief... I only owed $149.
Now, I can laugh at news stories about folks racing the clock.

Looking ahead, a year of retirement-only income will make it simpler.
Only a pension, SS benefits, dividends and some IRA draws to report.
.

 

[PigsDad]

Just got my taxes back from the CPA yesterday, and they included a summary of what my taxes would look like next year with the new tax bill (using this year's numbers). It was quite enlightening. Just wondering -- for those that do their own taxes, do any of this year's software packages offer a similar analysis?

Kurt

 

[DavidnRobin]

Just got my taxes back from the CPA yesterday, and they included a summary of what my taxes would look like next year with the new tax bill (using this year's numbers). It was quite enlightening. Just wondering -- for those that do their own taxes, do any of this year's software packages offer a similar analysis?

Kurt

Not yet for TurboTax - or TaxSlayerPro (which I use for VITA clients).

The comment about taxes being different by different tax preparers makes me smile. Hard to fathom this is correct for normal taxes (W2, 1099 INT/DIV, 1099B, 1099R) with typical Itemized dedications. Should only be one result.
Certainly chances to be different for more complex taxes (e.g. Sch C, 1099-MISC, K1s) that have grey areas.


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[Brett]

Not yet for TurboTax - or TaxSlayerPro (which I use for VITA clients).

The comment about taxes being different by different tax preparers makes me smile. Hard to fathom this is correct for normal taxes (W2, 1099 INT/DIV, 1099B, 1099R) with typical Itemized dedications. Should only be one result.
Certainly chances to be different for more complex taxes (e.g. Sch C, 1099-MISC, K1s) that have grey areas.
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right, last week the Wall Street Journal had a excellent article on the 20% pass through deduction ... a good "grey area" to decrease taxes if you're a professional - lawyer, doctor, etc. ... google "crack and pack wsj"
..
.
don't be a "tax chump" !

 

[Talent312]

Just wondering -- for those that do their own taxes, do any of this year's software packages offer a similar analysis?

Tax Act does. After you finish your tax return, you can power up their "Federal Tax Calculator" that shows your current status and numbers in one column and uses that to project the next two years (2018 & 2019). You can adjust the entries for each of the next two years to account for changes and different scenarios.

Using current numbers, it projects that I would receive refunds in excess of $1800 in 2018 and 2019. However, I made some changes that I know will happen, and it shows that I still get refunds, but significantly less.
We shall see...

 

[CalGalTraveler]

Californian here: Our accountant eFiles our taxes and gets acknowledgement almost instantaneously. Also, my kids efile using Turbotax Freedom and get FTB and IRS acknowledgement instantaneously.

BTW...Our accountant ran our 2017 tax info with 2018 tax reform rules and our taxes for 2018 will be within $100 of where they are today. Woohoo! I was worried we were going to be forced to sell our California home and establish residency in Nevada, or do some gaming like that because of the newly instituted $10k SALT Tax cap.

He said all of the returns he has worked on so far have been as equal or better taxwise because the drop in the tax bracket makes up for the loss in the SALT deduction.

 

[Sugarcubesea]

If you have a one-time capital gains that come in middle of the year, are you supposed to pre-pay the capital gains tax during the year or can you wait until you file at the end of the year? If you wait until when you file your taxes, is there penalty for not pre-paying the estimated capital gains tax during the year?

I’m going thru this right now and my tax attorney told me once I sell my parents house I need to make a quarterly payment

 

[DeniseM]

I'm going to have to find a new tax preparer next year. This year, my guy (who is getting elderly and is in poor health) forgot to include my IRA, even though I verbally reminded him, and it was on my tax worksheet, and then after I received the incorrect return and called him about it, he either forgot to re-do my tax return, or he forgot to mail it to me. Either way - I don't have it yet, and it makes me wonder if he made other errors.

 

[Talent312]

...This year, my guy (who is getting elderly and is in poor health) forgot to include my IRA, even though I verbally reminded him, and it was on my tax worksheet, and then after I received the incorrect return and called him about it, he either forgot to re-do my tax return, or he forgot to mail it to me. Either way - I don't have it yet, and it makes me wonder if he made other errors.

Did he say that he'd fix it, or did he assume that you had?
I might run the return thru an online tax prep to see what else gets an alert.
I'd follow up with the guy about getting it to me, "or do I have come to see you?"

.


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[DeniseM]

He told me he would correct it and would send it out the next day, I waited a week and it didn't arrive, I called him again and he said he had already sent it out, and he would send it again.

 

[VacationForever]

I’m going thru this right now and my tax attorney told me once I sell my parents house I need to make a quarterly payment

We decided to do it ourselves for 2017 since we no longer have our business. We paid $2400 to our CPA last year to do 2016 taxes for our business and personal income tax. We bought the audit representation plus CPA consultation and paid a total of $185 or something like that to TurboTax. Anyway the CPA said since we paid no income tax in 2017, we do not need to pre-pay anything in 2018 to the IRS. Our itemized deduction was twice our income in 2017. We had no income except for some dividends in 2017.

 

[bogey21]

Taxpayers must pay their taxes throughout the year either through payroll withholding or by making quarterly estimated payments; otherwise, tax underpayment penalties are assessed. However, underpayment penalties are avoided if any of the following situations apply:

I don't doubt that the rules quoted are correct. OTOH I have never made Quarterly Payments and for the last 25 years or so have almost always owe the IRS between $6,000 and $10,000 and pay by letting them take it from my Bank Account when I file. I have never been billed for a penalty. It seems unlikely to me but maybe I come under one of the exceptions. I have no clue. All I know is that I have never been billed.

George

 

[DavidnRobin]

I don't doubt that the rules quoted are correct. OTOH I have never made Quarterly Payments and for the last 25 years or so have almost always owe the IRS between $6,000 and $10,000 and pay by letting them take it from my Bank Account when I file. I have never been billed for a penalty. It seems unlikely to me but maybe I come under one of the exceptions. I have no clue. All I know is that I have never been billed.

George

The major and most used rule:
If 90% of tax liability is paid, then there will be no penalty assessed. In the past I have always owed taxes, but stayed above 90% threshold. Therefore, no penalty.


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[mentalbreak]

Record procrastination here. Just downlading my tax software now.