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Estimated Tax filing OT (Office Topic)

  • 1.  Estimated Tax filing OT (Office Topic)

    Posted 09-04-2022 17:39
    While doing this tedious task I discovered something today. The IRS changed from Quarterly time allotment to something that allows for filing due dates quarterly as before but no more need to extrapolate earnings for the last two weeks of the June/September quarters. The difference is the time periods involved:
    1st Qt: 1/1 -  3/31, filing by 4/18/22
    New "Quarters":
    2nd Qt: 4/1 - 5/31,  filing by 6/15/22
    3rd Qt:  6/1 - 8/31,  filing by 9/15/22
    4th Qt: 9/1 - 12/31, filing by 1/17/23

    Plan on getting audited within the next few years with the soon-to-be newly enhanced IRS. Check out what else might be due through the year, here's one site.

    ------------------------------
    Regards,

    Jon Page
    mailto:jonpage@comcast.net
    http://www.pianocapecod.com
    ------------------------------


  • 2.  RE: Estimated Tax filing OT (Office Topic)

    Posted 09-28-2022 13:44
    I have always worked somewhere else and tuned pianos on the side, and have done my taxes at the end of the year along with my other job's taxes.  I have done so well this year that I am able to quit my part time job and just tune/repair pianos full time.  In your opinion, should I start paying estimated taxes?

    Thanks Jon

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    Patrick Greene
    OWNER
    Knoxville TN
    (865) 384-6582
    ------------------------------

    Original Message


  • 3.  RE: Estimated Tax filing OT (Office Topic)

    Registered Piano Technician
    Posted 09-28-2022 13:46
    Absolutely. You're already late for your 3rd quarter payment (due September 15). Better late than never!

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    Patrick Draine RPT
    Billerica MA
    (978) 663-9690
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    Original Message


  • 4.  RE: Estimated Tax filing OT (Office Topic)

    Registered Piano Technician
    Posted 09-28-2022 14:00
    Hi Patrick

    First of all, congratulations on becoming a "full time" piano tuner. There will be some tough times ahead, but in the long run, this is one of the greatest professions in the world. 

    I would contact a competent CPA in your area and develop a good relationship. There have been many article written in the Journal on the subject, but basically, keep very accurate track of all your business expenses like your tools, parts, telephone, gas, computers, envelopes, stamps, etc. Those are all 100% deductible. You can also deduct all the travel expenses to attend a convention or seminar. 

    But you can also deduct as a business expense part of the cost of  running your house if you are working from home. Figure out what percentage of your home you use for business like a workshop and your office. home expenses, and deduct that part as a business expense. Let's say the square footage of your office and workshop is 20% of the total square feet of your house. That means that you can deduct as a business expense, 20% of the the electricity, gas, heating oil, pest control, lawn service, mortgage or rent, home owners insurance, etc, you pay. 

    As far as paying estimates, this is where your CPA can help you, He will print out the forms you need to send to the IRS every quarter. (and also the state taxes, if any).  You won't have to pay anything this year, since you're just starting out. But starting next year, save up a little extra month so that when the bill comes due, you'll have the money. 

    Wim



    Original Message


  • 5.  RE: Estimated Tax filing OT (Office Topic)

    Registered Piano Technician
    Posted 09-28-2022 15:21

    Hi Patrick,

    Congratulations on going full time!

    Yes, you're required by law to pay your quarterly estimated taxes. You can use a CPA or EA to help figure out exactly how much you owe. Or, especially at the beginning, you can set aside 25% of your gross income for taxes. This is just a ballpark figure but it will get you close until you make more than $90,000. 

    The federal taxes are usually easier to figure out than the state taxes are, at least in my experience, but a tax pro can help you with that. It's always better to send in a little too much than not enough, but you also don't want to send in thousands too much because then you've essentially loaned the government all that money at 0% interest. 



    ------------------------------
    Benjamin Sanchez, RPT
    Piano Technician / Artisan
    (256) 947-9999
    www.professional-piano-services.com
    ------------------------------

    Original Message


  • 6.  RE: Estimated Tax filing OT (Office Topic)

    Registered Piano Technician
    Posted 09-28-2022 15:44
    In the future, all that you're required to pay is the same amount as the previous year, no matter how much or little you're making that year. The IRS won't penalize you if you paid too much or not enough. 



    Original Message


  • 7.  RE: Estimated Tax filing OT (Office Topic)

    Posted 09-28-2022 16:17
    This topic comes up nearly annually. Last year when it was being discussed, I asked my CPA about this. As long as you pay the amount that is owed, you don't have to make every quarterly payment. It's a great idea because it helps us to get it paid over time rather than once per year. But it's fine if you pay what is owed in 2 or 3 payments, or even 1 payment. I'd still ask your own CPA for clarity, and whether there might be a penalty is only one annual payment is made.

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    John Formsma
    New Albany MS

    "Sneak up on optimal."
    --Ron Nossaman
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    Original Message


  • 8.  RE: Estimated Tax filing OT (Office Topic)

    Registered Piano Technician
    Posted 09-28-2022 16:48
    John,
    I believe you're correct to only filing on April 15th. Many years ago I was audited because I had a large "supplies" deduction. This was due to the fact I was installing Pianodisc players. The auditor made an entry in my records to account for this. She also mentioned that I wasn't required to file quarterly because I was a sole proprietor. Corporations (such as LLC) are, on the other hand, contracts between the government and the individual, thus required to fulfill the duties of the privileges afforded to corporations.
    In over 50 years of business as a sole proprietor, I have never filed a quarterly IRS form -- just the annual.
    Roger

    ------------------------------
    Roger Gable RPT
    Gable Piano
    Everett WA
    (425) 252-5000
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    Original Message


  • 9.  RE: Estimated Tax filing OT (Office Topic)

    Posted 09-30-2022 13:03

    Thanks Benjamin.  That is a good rule of thumb.  I will start holding back 25% of my income for taxes and start making quarterly payments.  We don't have a state tax per se, but we do have city/county taxes.  



    Hi Patrick,

    Congratulations on going full time!

    Yes, you're required by law to pay your quarterly estimated taxes. You can use a CPA or EA to help figure out exactly how much you owe. Or, especially at the beginning, you can set aside 25% of your gross income for taxes. This is just a ballpark figure but it will get you close until you make more than $90,000. 

    The federal taxes are usually easier to figure out than the state taxes are, at least in my experience, but a tax pro can help you with that. It's always better to send in a little too much than not enough, but you also don't want to send in thousands too much because then you've essentially loaned the government all that money at 0% interest. 



    ------------------------------
    Patrick Greene
    OWNER
    Knoxville TN
    (865) 384-6582
    ------------------------------

    Original Message


  • 10.  RE: Estimated Tax filing OT (Office Topic)

    Registered Piano Technician
    Posted 09-30-2022 17:47
    I used to hold back 33% (22% tax bracket plus SE tax and state and local taxes), but every year I'd get a really, really big refund. It turns out holding 25% works well because that's pretty close to what you'll pay after you take out all the various deductions. Of course, once you start netting more than six figures you'll have to withhold more, but at that point you should definitely be using a tax pro. Until then you can get really close on your own.

    ------------------------------
    Benjamin Sanchez, RPT
    Piano Technician / Artisan
    (256) 947-9999
    www.professional-piano-services.com
    ------------------------------

    Original Message


  • 11.  RE: Estimated Tax filing OT (Office Topic)

    Posted 09-28-2022 16:26
    Estimated tax payments are important to keep current. By the end of the year, you need to have paid 75% of your total liability or be eligible for a penalty. I set aside 33% when making a weekly deposit. 15% self employed Social Security Tax + 5% State Tax + 12% Federal Income Tax (or whatever tax bracket you're in) and keep it set aside from spending cash to send in quarterly. Having to scrounge around to cough up the dough every quarter is avoided this way. I overpay by the end of the year, to cover the 1st quarter's payment for the following year; this allows for better cash flow in the winter. So when I file for last year's taxes, I have the current 1st Q payment covered. I don't mind overpaying as it just reduces the amount needed to submit and maybe have a carry-over to the next quarter. Either way, they'll get it sooner or later; sooner lets me relax a little.

    I use Quicken to keep track of expenses and it easily imports to TurboTax. Each quarter, Quicken prints out an itemized Report that I use to figure my Quarterly Payments to the Fed and State. That 33% has proven to give the results I want in tax payments; by the end of the year, after figuring in deductions, I have the overpayment covered.
    The Trump Tax Cuts left me with a sizable Carry-Over that is now being taken away. But it's nice to have on hand to reduce quarterly payments.

    I also budget auto and housing expenses to include insurance and property taxes. Knowing what the total is for each (divide by 12), I can set aside auto and housing monies each month. When they come due, I have the cash on hand to cover them, no scrounging around. On 9/4 I set aside September's Auto & Housing Budget Allotment.  Having been self employed since 1974, it took a while to figure this out on my own.

    ------------------------------
    Regards,

    Jon Page
    mailto:jonpage@comcast.net
    http://www.pianocapecod.com
    ------------------------------

    Original Message


  • 12.  RE: Estimated Tax filing OT (Office Topic)

    Posted 09-28-2022 16:37
    Just a reminder; We are now in the 4th Quarter for 2022: 9/1 -12/31

    ------------------------------
    Regards,

    Jon Page
    mailto:jonpage@comcast.net
    http://www.pianocapecod.com
    ------------------------------

    Original Message


  • 13.  RE: Estimated Tax filing OT (Office Topic)

    Posted 09-28-2022 17:10
    Everything I've read indicates self-employed persons must file quarterly Estimated Taxes.

    This just came in from the state of Massachusetts. It is the interest they will pay or you will owe.
    2022

    First quarter
    Overpayments
    2%

    Underpayments
    4%
     

    Second quarter
    Overpayments
    3%

    Underpayments
    5%
     

    Third quarter
    Overpayments
    4%

    Underpayments
    6%
     

    Fourth quarter
    Overpayments
    5%

    Underpayments
    7%


    ------------------------------
    Regards,

    Jon Page
    mailto:jonpage@comcast.net
    http://www.pianocapecod.com
    ------------------------------

    Original Message


  • 14.  RE: Estimated Tax filing OT (Office Topic)

    Registered Piano Technician
    Posted 09-28-2022 17:38
    Having been audited twice in my lifetime and the IRS auditors never asked me to file quarterly. I believe the logic may lie in the fact that sole proprietors do not have a contract with the federal government regarding "the right to work". The IRS (federal government) has no recourse of penalty for failure to file quarterly in the absence of a corporate contract, only seizure of assets to pay annual taxes due. Maybe I'm wrong, but 50 years and no request or demand? There must be some credibility to that logic. 
    Roger

    ------------------------------
    Roger Gable RPT
    Gable Piano
    Everett WA
    (425) 252-5000
    ------------------------------

    Original Message


  • 15.  RE: Estimated Tax filing OT (Office Topic)

    Registered Piano Technician
    Posted 09-28-2022 18:36
    I think this is the official answer:

    https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center

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    Benjamin Sanchez, RPT
    Piano Technician / Artisan
    (256) 947-9999
    www.professional-piano-services.com
    ------------------------------

    Original Message


  • 16.  RE: Estimated Tax filing OT (Office Topic)

    Posted 09-28-2022 22:32
    Ever since I started as self employed, the IRS sent me the quarterly vouchers to send in with my quarterly payments. This has stopped with their new online payment system. If I forget to meet a tax date, I am charged interest and/or a late fee.

    ------------------------------
    Regards,

    Jon Page
    mailto:jonpage@comcast.net
    http://www.pianocapecod.com
    ------------------------------

    Original Message


  • 17.  RE: Estimated Tax filing OT (Office Topic)

    Registered Piano Technician
    Posted 09-29-2022 01:27

    Rules vary between state and federal as far as interest and penalties. The Feds have been quite lenient during COVID for late filings of quarterly returns. The states (if you pay state income tax) not so much. 

    It's not *illegal* to not file quarterlies it just may not be advisable. You can get yourself in a bind if you don't have the funds come April 15th.

    The April 15th quarterlies are often burdensome as you can find yourself paying the Feds and State for the previous years balance due as well as feeding IRAs with last minute contributions. I know many self employed folks who skip the April payment but make it up in June, September and January with no federal penalties assessed. States are a different matter and many states are quite punitive but not all. States don't quite have the leeway that the Feds do when it comes to revenue so it makes sense that they would be more insistent on receiving monies in a timely manner. 

    My attitude is always pay yourself first meaning prioritize, especially, deductible retirement contributions (always maximize your tax deductible SEP-IRA contributions) but be mindful of tax liabilities as you don't want to get caught short come April 15th. 

    When in doubt take advice from tax accountants not piano technicians. 

    BTW the Trump tax cuts for individuals expire in 2025, but not for corporations (are we surprised?) or pass through businesses (like ours) but check with your accountant in advance as to how that will affect your tax liability. 



    ------------------------------
    David Love RPT
    www.davidlovepianos.com
    davidlovepianos@comcast.net
    415 407 8320
    ------------------------------

    Original Message


  • 18.  RE: Estimated Tax filing OT (Office Topic)

    Posted 12-17-2022 21:06
    Hey
    I am bumping this thread because in another month I will need to file my quarterly payment with the IRS.  I started my business in mid October full time  and I guess my question is should I file quarterly, or should I just wait to do everything when I file my taxes in April?  I am worried that if I overpay during the quarters, that I will not get the excess money back when I file my taxes.  Some tuners have told me that they file quarterly and others just figure it all out annually.  I  want to do the right thing that will not trigger an audit in the future.

    Thank you
    Patrick

    ------------------------------
    Patrick Greene
    OWNER
    Knoxville TN
    (865) 384-6582
    ------------------------------

    Original Message


  • 19.  RE: Estimated Tax filing OT (Office Topic)

    Registered Piano Technician
    Posted 12-17-2022 21:22
    Patrick

    I would suggest you ask a CPA this question. 
    For what it's worth, I do know that your quarterly payments are based on the previous year's taxes. Since you didn't pay taxes in 2021 as a self employed person, you don't need to pay estimated taxes in 2022. And your January payment is part of the 2022 tax year. You will need to pay all of the taxes you owe for 2022 in Aprill plus the first quarterly payment for 2023. 



    Original Message


  • 20.  RE: Estimated Tax filing OT (Office Topic)

    Posted 12-17-2022 22:23
    Hey Wim
    I do have a CPA and will ask her.  You are right, I did not pay taxes as a fully self employed person in 2021, therefore I will pay my 2022 taxes when I file in April.

    That gives my answer..I should do quarterly payments going forward

    Thank you
    Patrick

    ------------------------------
    Patrick Greene
    OWNER
    Knoxville TN
    (865) 384-6582
    ------------------------------

    Original Message