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Paging Tax Troll EA

Sorry to be bothering you out of season but...

After a tense time of waiting to see if I'd still be employed, my company was acquired by another company and I still have a job (yay!).

So I have my 401k from the old job, and there will be another one at the new job (and both are with the same company, Vanguard).

A couple of the folks who have done rollovers before were talking about having an additional tax liability with a rollover, and suggested a Roth IRA.

I'll certainly check out what I need to do on my own, but I always appreciate reading your advice at tax time, and immediately thought of you when this came up.

Thank you so much!

by Anonymousreply 1503/20/2013

Not Tax Troll EA, but a proper rollover does not create a tax liability. 1099R shows money out 5498 shows money in. Arithmetic.

by Anonymousreply 109/06/2012

Thank you, Mr. President.

by Anonymousreply 209/06/2012

Dear Tax Troll - I hope you're out there to answer my question.

I just received a rather large check for some work I did many years ago. Taxes were not taken out of the check, and it's roughly equivalent to a year's salary (my annual salary sucks - the check is in the low-mid five-figure range).

Do I need to pay estimated taxes on it now or can I wait until April 15th? And if I pay now, how do I figure the amount of the tax? How do I pay? (do not want to do it online.) And how close do I have to get? Under these circumstances, is there a penalty for underpayment?

I tried googling my question but the results were pretty confusing. Help me, Tax Troll, you're my only hope!

by Anonymousreply 309/30/2012

[quote]After a tense time of waiting to see if I'd still be employed, my company was acquired by another company and I still have a job (yay!).

So I have my 401k from the old job, and there will be another one at the new job (and both are with the same company, Vanguard).

A couple of the folks who have done rollovers before were talking about having an additional tax liability with a rollover, and suggested a Roth IRA.

I'll certainly check out what I need to do

First of all, don't listen to those folks at work. They have it backwards.

Converting money that is in an employer plan (or a regular IRA) to a Roth IRA will ALWAYS result in a tax liability.

An actual rollover of sheltered employer funds (such as a pension plan or a 401K) directly to a traditional IRA, done "trustee to trustee" (meaning you do NOT get a check), will have no tax implications whatsoever. If the employer reports it correctly, nothing has to go on your tax return.

If you receive a check for your 401K, your employer is generally required to withhold an arbitrary amount (usually 20%) for taxes, even if you intend to rollover the rest. Therefore, if your 401K was $100K, you'd get $80K, which you would rollover. But the $20K that was used for taxes is still considered to have been withdrawn, and is taxable to you. You avoid that by doing a trustee-to-trustee transfer of the entire $100K.

PS: Please spell my name as TaxTroll (or TaxTrollEA) without spaces, as that is what comes up in a quick search. During busy times, I can't search the words separately without it timing out. Thanks.

by Anonymousreply 410/03/2012

[quote]I just received a rather large check for some work I did many years ago. Taxes were not taken out of the check, and it's roughly equivalent to a year's salary (my annual salary sucks - the check is in the low-mid five-figure range).

Do I need to pay estimated taxes on it now or can I wait until April 15th? And if I pay now, how do I figure the amount of the tax? How do I pay? (do not want to do it online.) And how close do I have to get? Under these circumstances, is there a penalty for underpayment?

Not really enough info for a complete answer. You say that "taxes" were taken out. Were you paid as an employee? Was Social Security and Medicare (or FICA) withheld? Or is there just federal income tax taken out?

If you are an employee, you'll owe only income tax, minus the federal income tax withheld.

If you are being paid as an independent contractor, you likely will owe regular income tax PLUS the extra 13.3% self-employment tax, less whatever tax was withheld.

In either case, if the amount you owe on your return at year end exceeds the GREATER of $1,000 or 10% of your total tax liability for the year, there could be a penalty for not having enough withheld through the year. One exception: If the amount you had withheld equaled your previous year taxes in full (or 110% of them, if your AGI is over $150K).

If you think you'll be in a penalty situation, you can make an estimated tax payment with the 2012 Form 1040ES. Suggest doing so as soon as possible, since any penalty will continue to run until the date they receive your check.

However, since this was a one-time thing with the extra money, likely you can write a letter and get the penalty for underpayment of your estimated taxes waived, just this one time. Wait until they assess the penalty, then explain the situation. Bottom line: "I didn't realize I had to make payments, it was just one time, should not happen again." 90%+ chance they'll buy it.

by Anonymousreply 510/03/2012

OOps ... out of practice on my quoting. Sorry 'bout that. :)

by Anonymousreply 610/03/2012

Thank you very much for answering, TaxTrollEA, but I'm afraid you misread my post. I said that taxes were NOT taken out. Nothing was taken out, not FICA, not Social Security, not Medicare, not anything.

I was paid by the agency that had contracted the work. The contractor paid the agency, they took their 10% cut and the agency issued me a check for the balance.

So the agency (who has my SSN and a W4 from me on file, but for whatever reason did withhold any taxes) is the one who paid me.

It sounds like if I send a 1040ES for with about 15% of the monies I was paid, I should be OK? Even if I owe more, the fact that I paid something shows I did it in good faith, and your suggestion in the last paragraph of your post would work.

by Anonymousreply 710/03/2012

Oops, sorry - that next to last paragraph should have read "for whatever reason did NOT withhold any taxes".

by Anonymousreply 810/03/2012

EA, when sending my check for taxes can I just write "SSNO--1234" to indicate last four digits alongn with the year I'm paying?

by Anonymousreply 910/03/2012

[quote]It sounds like if I send a 1040ES for with about 15% of the monies I was paid, I should be OK? Even if I owe more, the fact that I paid something shows I did it in good faith, and your suggestion in the last paragraph of your post would work.

Just reread your original post ... sorry for the mix-up.

It is obviously not a usual situation to receive pay for work you did "many years ago" .. so I'm guessing this was some kind of claim on back wages you were owed. If the payor is not the original employer, they would have no duty to withhold income tax or pay SS/Medicare on your behalf.

15% may not be enough, depending on the total income you have for the year (If your total income is over, say, $43,000, it almost definitely won't be enough.) But it is better than nothing.

I'd suggest you see a local knowledgeable tax professional (and NOT someone in a shopping center tax office) when it comes time to have your return done. My suggestion would be that the preparer discuss the specifics with you, and see if filing a SS-8 and Form 8919 might get you out of being assessed the 13.3% self-employment tax, which would usually apply on compensation on which no employer withholds or pays FICA. It could save you a lot of money.

by Anonymousreply 1010/03/2012

[quote]when sending my check for taxes can I just write "SSNO--1234" to indicate last four digits alongn with the year I'm paying?

The IRS says no. They need the entire SS#, in case the check gets separated from the voucher that accompanies it.

And realize that the voucher, in the same envelope, has the ENTIRE SS#. So what is gained by truncating it on the check? Most checks aren't actually returned to the bank for payment anymore, so nobody else would ever see it.

Of course, if you want to be super careful, you can now make all IRS individual income tax payments electronically, using EFTPS. Go to IRS.Gov and click on that icon for info.

by Anonymousreply 1110/03/2012

Hi Tax Troll - I asked you a question earlier this year but our filing statuses for my partner and I are getting a bit more complicated.

We want to hire someone and I wondered if you had some information - if we want someone to file our taxes for us, and someone who would be able to address our specific case as an LGBT couple, who should that be? Is that a specific tax advisor...or a CPA?

(We are also going to do - it's way overdue - our financial and legal planning and we are looking at advisors for that, but I didn't know if that should or could be the same person.)

Any advice is appreciated, and happy holidays!

by Anonymousreply 1212/18/2012

[quote]Hi Tax Troll - I asked you a question earlier this year but our filing statuses for my partner and I are getting a bit more complicated. We want to hire someone and I wondered if you had some information - if we want someone to file our taxes for us, and someone who would be able to address our specific case as an LGBT couple, who should that be? Is that a specific tax advisor...or a CPA? (We are also going to do - it's way overdue - our financial and legal planning and we are looking at advisors for that, but I didn't know if that should or could be the same person.)

Sorry for the month+ delay on a response, but the "search" option here is pretty much gone, and I don't see these old threads when they are reactivated. (I'll be starting a new thread just for questions for this season. Please DO NOT post any more questions to this or any old 2012 threads!)

To answer your question, there is no specific type of preparer who would likely be knowledgeable about LGBT matters ... except, obviously, one who has a lot of us in his/her practice. Ditto on financial planners.

My suggestion is that you check your local LGBT community center, gay chamber of commerce, or (if neither of those available) a gay newspaper listing professionals, and get someone from there. A web search is also a possibility, but you might only get someone who is looking for LGBT clients (Some marketers suggest that non-gay businesses advertise to get "your share of their gay dollar" ... UGH).

Don't be shy about experience with same gender couples, and how long they have been in practice. Ask around to your friends and see who they use, and are happy with. Ask about professional credentials (for tax pros, EA or CPA is preferable.)

by Anonymousreply 1301/26/2013

I heart TaxTrollEA! Thanks for your time and expertise.

by Anonymousreply 1401/26/2013

Tax Troll: I NEED you!

In December of 2012 I started a Delaware based LLC (though I live in CA). I was it's only employee. It didn't make any money until January of 2013. Do I need to file anything for a business that earned no revenue for 2012?

Yes, I'm a moron. Sorry!

by Anonymousreply 1503/20/2013
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