The Tax Preparation Blog

Archive for the ‘Paying Taxes’ Category

Year In Review: Loudoun’s Towns

In Loudoun’s western towns leaders spent much of 2009 wrestling with budget and utility concerns. Economies were practiced in every local municipality as budgets were pared down, jobs either shifted or not refilled, and capital projects put on hold.

Sluie Drive.m4v

Question: Estimated Tax and Schedule L Payments?

I live in the state of WV our total gross income was $67,604. This year I filed taxes and payment due was $759. I believe this was because I had a change in job status last year, cashed out 12K from my 401K and was on unemployment for 5 months. Our total income was much higher b/c of the 401K distribution. I have already paid the $759 that was due, and then I receive a letter saying I owe another $250. It says it is for Estimated Tax & Schedule L Payments. Every time I try to call WV Tax Dept I can’t get through. Time is running out and I need to know what Est. Tax & Schedule Payments are? Is it something that I am required to pay? Is it something that falls into the category H&R Block will pay? Please explain. And please no lectures on cashing out my 401K plan. I feel I made the right decision when I did it – that’s final.

Thank you in advance!

Answer: Taxes work on a pay as you go system.

So…not only are you supposed to have money withheld, it has to be enough money or you can get socked with a penalty for failing to send in enough. When money isn’t withheld via a W-2 or a 1099, it’s voluntarily sent in via a check…and called an “estimated tax payment.” When the amounts are missing or not enough, you can get hit with “estimated tax penalties.”

There are waivers–often based on prior year income or if income is received unevenly during the year. Neither of which the tax person is really going to know about unless you told them. (It’s not the preparer’s fault you owe the money.)

Business Briefs January 11, 2010

Doug Bold was recently honored by family, friends and coworkers in Houston for his 33 years of service with Shell Oil Co. and subsequent retirement, effective Nov. 30, 2009.

Second American Revolution: Howard Phillips (4 of 4)

The current downturn in the global economy has created an environment with an ever-increasing level of threats to all of us. These threats are often outside of your control and therefore, there is little or nothing that you can do to stop them affecting you. However, the degree to which these threats affect you can be limited by taking ownership over the factors that you can control.

First things first

The first thing that you can do is to act now and seek to protect yourself against the threat of redundancy. At present, there are policies available that can provide you with a replacement income in the event of involuntary unemployment. There are also products, such as mortgage repayment protection, that can cover your mortgage repayments in the event of redundancy. These products do not pay out indefinitely, but can help you to manage your way through a potential cash-flow crisis in the initial period after redundancy. Obviously, there is a cost involved in taking out one of these policies, so it is important to identify how this cost may affect your current cash-flow position. That said, this kind of protection can help you get through the initial stages of your redundancy and allow you the financial freedom to plan for the future. In turn, by limiting the immediate effects on your cash-flow, it can give you an opportunity to reassess your career path and may also allow you the opportunity to re-skill for an entirely new career.

Already Redundant?

If it’s too late to protect yourself against the threat and you are faced with the reality of redundancy, you need to understand all of the implications this has on your personal economy so that you can adequately plan the road ahead. The tax treatment of redundancy payment is the first area that you need to manage and control. There are a number of reliefs available to you on a redundancy payment that can help reduce your tax liability. The relief option you choose is not always a straight-forward case of selecting the largest relief, as in some cases you may be waiving your rights to a tax-free lump sum from your pension on retirement. So although you may receive more now, you may be forfeiting a lot more in the future. Therefore, selecting the appropriate relief is vital and it is important that you take independent advice to ensure that the right decision is made.

There is also a further relief called ‘Top Slice’ relief that is available to you in the year of redundancy. Many people tend to overlook this relief due to that fact that you can only claim it at the end of the tax year. In many cases, by not claiming Top Slice relief people can miss out on substantial tax rebates. This is valuable money needed to help you financially following a redundancy and could be lost if you do not know how to claim it back. Taking control of your pension fund is the next area that must be looked at in the event of redundancy.

If you have been in pensionable employment for a number of years, it is likely that you have built up a substantial pension fund within the company pension scheme. This is a valuable part of your personal economy and it is therefore vital that you make the right decision in relation to this. The event of redundancy can often resulting an opportunity for you to take ownership and control of your pension fund. In certain circumstances, it is now possible to take ownership of the fund that you have built up within the company pension.

Ownership in this case does not simply mean giving you the ability to choose where your money is invested pre-retirement, but also involves the ownership of the money post-retirement. In a typical company pension scheme, owning the pension fund post-retirement is not possible as in most cases, you will be forced to buy an annuity or income for life. This involves giving away the fund that you have built to an insurance company who will pay you a certain amount for as long as you live. The key unknown in this equation is how long you are going to live. If, by taking ownership of the pension fund, you can keep control of the total value of the fund, you now open up new possibilities post-retirement. It also means that you no longer have to give away your fund to a third party, but can now control and manage your asset in retirement. By taking ownership of your pension fund, you now have the ability to bring another part of your personal economy under tighter control and possibly open up options that would not have previously been available to you.

AP: Obama Backs High-End Health Plan Tax

Tax Included in Senate Bill to Fund Reform is Opposed by Many House Democrats, Organized Labor

Ron Paul Revolution: PART 1 – The Profound Plan For Freedom

News in brief

Story created Dec 31, 2009 – 11:17:56 CST. Iowa Mold Tooling Co. Inc. (IMT), an Oshkosh Corporation company, announced last week that it has expanded its manufacturing operations into McIntire, Iowa, by opening a new facility to handle its increased welding activities.

Iowa Senate Republican Alternative for SILO

Question: Can we deduct TDS on service tax? can you give some references?

I am a professional consultant, on my total fee amount (gross amount) I add service tax @ 12.36% to arrive at the bill amount (net amount) payable by the clients. While making the payments, clients were deducting TDS on whole bill amount(Net amount) which includes service tax too, when I argued with them that service tax is not my income and it is paid to the government in total, therefore TDS not to be deducted on service tax amount, some clients agreed and others did not. Can you give lie conclusive reference / Guidelines in the matter so that I may convince my clients for not deducting TDS on service Tax

Answer: The word used in provision for tax at source is “Any sum” which means any sum.

The Central Board Of Direct Taxes issued circular 715 dt 8/8/1995 which contained question number 30 which answer the aforesaid question.

* Question 30 : Whether the deduction of tax at source under sections 194C and 194J has to be made out of the gross amount of the bill including reimbursements or excluding reimbursement for actual expenses ?
* Answer : Sections 194C and 194J refer to any sum paid. Obviously, reimbursements cannot be deducted out of the bill amount for the purpose of tax deduction at source.

so its clear that tax should be deducted on full amount of payment

No PAN number? Tax burden to rise

Pan card has to be submitted for financial transactions. Otherwise, tax burden will go up.

Tax Tips – Tell me… “What is my TDS status if I have worked for two employers?”