Calling all WF wanna-be-accountants... tax question

C

CLKeenan

Banned
Jun 24, 2006
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Boston, MA
So I haven't paid any quarterly earnings taxes on my publisher revenue. I'm receiving a hefty bonus for my full time job. Since I'm a sole proprietor, income from my website and income from my full time gig go in the same bucket. I have the option of with holding part of that bonus check and putting it directly towards taxes.

I was thinking about doing an estimate of how much I would need to pay in taxes, and then deducting that from my bonus check and have that go straight to the taxman.

So hypothetically, lets just say my bonus check is $25,000 and the amount I owe in taxes for 2011 for the website is $10,000. Does it make sense to take out $10,000 from my bonus check so that only $15,000 is taxed at the higher bonus/capital gains rate?

/inb4getarealaccountant
 


How is the bonus being taxed? Is it going as wages or is it going on a 1099? And it depends on the whole tax situation for the year. Have you been paying in on the rest of your income this year? If so did you over pay? If you havent been paying in then prob a good idea to save that cash for the tax man
 
I've been paying federal, state, SS, and medicare taxes on my full time job earnings. Haven't elected to overpay. Haven't paid anything on my self-employment income.
 
You can't deduct the amount of taxes you deduct from your income.

If you receive 25k bonus, all 25k is taxable regardless if you withhold $1 or $25000.

If the bonus is W-2 income then se taxes should already be held out.

With the limited info. You need to pay before end of december or you could be hit with some interest and penalties, depending on your prior year liability.

Don't forget about state taxes either.

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CLKeenan said:
I've been paying federal, state, SS, and medicare taxes on my full time job earnings. Haven't elected to overpay. Haven't paid anything on my self-employment income.
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Well you may still have overpaid (which you probably should do because of your sideline income) Its going to be really hard to answer with out all the facts. Income, Expenses, Taxes already paid ect. Do you have an accountant that you can call and give the ball park numbers? More than likely your going to wind up owing money so probably be a good idea to hang onto some of that cash for the tax man
 
JVHorn88 said:
You can't deduct the amount of taxes you deduct from your income.

If you receive 25k bonus, all 25k is taxable regardless if you withhold $1 or $25000.

If the bonus is W-2 income then se taxes should already be held out.

With the limited info. You need to pay before end of december or you could be hit with some interest and penalties, depending on your prior year liability.

Don't forget about state taxes either.

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All is taxable, but at what rate? I'd rather have 15k taxed at 35% vs. the full 25k. Does that make sense or am I clearly missing the picture?
 
"bonus/capital gains rate?"

There is no "Bonus rate", and I dont see how you get "cap gains" from your income or web monies. You can't deduct taxes from your income, except state or local prop/income taxes so I am bit confused by your Q.

Basically it doesnt matter how you pay it, you will owe X amount of tax when you file for the year and calc all of your income and expenses, and will either get a refund or owe based on what taxes you already paid. If you owed quarterlies but did not pay, you will get a minor penalty probably depending.

I think its best to pay the tax if you think you will owe it anyway out out your bonus so you dont have to deal with paying it yourself as the payroll company does the work for you.

However, this has no impact on how much you will owe for year, as the IRS does not care how you get them the funds, all they care about is that they get their monies.
 
CLKeenan said:
All is taxable, but at what rate? I'd rather have 15k taxed at 35% vs. the full 25k. Does that make sense or am I clearly missing the picture?
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You didn't really say how the bonus was being paid out. Are you an employee or an independent contractor at the full time gig? If its going on your W2 they are going to deduct it for you (usually withheld at higher rate but not necessarily the actual taxable amount). If they 1099 you for if, your still going to include it as ordinary income on your tax return.

You cant deduct the tax to make the 15k the basis for your tax bill it just doesn't work that way. You need to look at the whole picture and not just the 1 check. You should have other deductions that will help offset your tax liability. You need to look at the total picture for the year to determine how much of that check you need to save for your tax bill. Who knows maybe you over paid and wont owe anything. Maybe you lost $50,000 on your side business and have a lot of deductions.
 
Above posters are correct.

If you want to talk on skype my id is same as here. I'm not always available but ill respond at some point.

That goes for anyone with tax questions btw, not just OP.

I'm a CPA but the info from these discussions shouldn't be relied upon for professional advice unless I've been engaged to perform paid services. This is just friendly conversation.
 
Coincidentally enough, I had a 45 minute phone conference with my CPA just yesterday about a very similar case for myself - it's not exactly the same but I'll try to relay any info I got from her. And I'm also in Mass.

First off on the paying taxes, if you don't pay Uncle Scam at least 90% of taxes owed in quarterly payments, you're gonna get hit with a fee.

Second, your bonus won't be taxed as capital gains unless your bonus is "paid" to you in shares and you cash those shares out or if you hold a specific # of shares and your "bonus" is really a profit sharing based on the number of shares you hold. I think you're conflating two concepts.

Third, with regards to mixing the money you are paid from your full-time job and the work you do as a sole prop... does your full-time job take out taxes and you receive a check with post-tax earnings? If so, put that shit in a separate bank account from your untaxed earnings.

Any payments you receive for work done under a W-2, is already taxed and goes into one account and any money received that you will have to file Schedule C for goes into another account. Why deal with that shit you ask? So you can take full advantage of deductions available on your Schedule C and Uncle Scam doesn't ass fuck you if you are ever audited.

We went over some other relevant points but I've typed enough.
 
Your gross bonus will be reported as income, not the net.

If you haven't paid any quarterlies on your self-employment, then having the taxes withheld from your bonus would be the wise thing to do. (W-2 withholding is deemed withheld equally through out the year; estimated tax payments are not. )
 
Technically its 90% of 2011 taxes or 100% of 2010 taxes, whichever is smaller.

If you had over 150,000 of agi in 2010 substitute 110% for 100%.

Could be relevant if you earned more in 11 than 10.

Those amounts will "penalty proof" you.
 
Don't ask tax questions on Wickedfire. You're just going to get a huge different variety of contradicting responses.

Talk to an accountant, trust me. They will sort you out no matter what. It's what they do for a living.
 
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