Estimated Payments - Yes or No
Gregg Lawless
Client has had no tax liability to IRS or CA for the past few years. However they are selling a rental in 2024 and will owe approx. $120,000 to the IRS and $50,000 to CA. Based on the requirements for estimates I do not believe any estimate is REQUIRED. However, I’m thinking it might be wise to make a nominal estimate after the close of escrow. THOUGHTS??
THANKS for your thoughts.
Gregg Lawless
Lee Reams
On Jul 7, 2024, at 4:52 PM, Gregg Lawless <glaw...@outlook.com> wrote:Client has had no tax liability to IRS or CA for the past few years. However they are selling a rental in 2024 and will owe approx. $120,000 to the IRS and $50,000 to CA. Based on the requirements for estimates I do not believe any estimate is REQUIRED. However, I’m thinking it might be wise to make a nominal estimate after the close of escrow. THOUGHTS??
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Matthew Bigelow
I once made a costly mistake when a client’s sale of their business pushed them into a “High Income” category for CA estimated tax payment requirements. I’d based the client’s estimates on the prior year, not realizing there were some exceptions to this rule. Essentially, if the current year’s CA adjusted gross income exceeds certain limits, they must make estimated payments based on the current year income and not prior year. See the following link about 2/3rds of the way down the page: https://www.ftb.ca.gov/pay/estimated-tax-payments.html
Matthew Bigelow, E.A.
JLZ Business Services, Inc.
Ph. (805) 643-3295, Fax: (805) 643-3297
email: mbig...@jlzinc.com
Web: www.jlzinc.com
Office Hours: M – TH 9 AM – 5 PM, F 9 AM – 2 PM
Click here to upload files.
The information contained herein is confidential and may be privileged and is intended only for the individual or entity to whom it is addressed. Any unauthorized use, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify me immediately.
From: clientwh...@googlegroups.com <clientwh...@googlegroups.com>
On Behalf Of Lee Reams
Sent: 07/08/2024 8:30 AM
To: 'dbe...@aol.com' via ClientWhysConnect <clientwh...@googlegroups.com>
Subject: Re: [clientwhysconnect] Estimated Payments - Yes or No
Gregg,
You are correct, no estimates are required. If your client had no tax liability in the prior year and was a U.S. citizen or resident for the entire year, they are not required to make estimated tax payments. The same rule applies to CA if they were a CA resident the entire prior year. Other considerations might be whether the prior year return might be prone to audit and the tax not being zero, and how responsible is the client to setting aside the tax liability and spend or obligate it before the time comes to pay the taxes.
On Jul 7, 2024, at 4:52 PM, Gregg Lawless <glaw...@outlook.com> wrote:
Client has had no tax liability to IRS or CA for the past few years. However they are selling a rental in 2024 and will owe approx. $120,000 to the IRS and $50,000 to CA. Based on the requirements for estimates I do not believe any estimate is REQUIRED. However, I’m thinking it might be wise to make a nominal estimate after the close of escrow. THOUGHTS??
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scott jessup
I once made a costly mistake when a client’s sale of their business pushed them into a “High Income” category for CA estimated tax payment requirements. I’d based the client’s estimates on the prior year, not realizing there were some exceptions to this rule. Essentially, if the current year’s CA adjusted gross income exceeds certain limits, they must make estimated payments based on the current year income and not prior year. See the following link about 2/3rds of the way down the page: https://www.ftb.ca.gov/pay/estimated-tax-payments.html
Matthew Bigelow, E.A.
JLZ Business Services, Inc.
Ph. (805) 643-3295, Fax: (805) 643-3297
email: mbig...@jlzinc.com
Web: www.jlzinc.com
Office Hours: M – TH 9 AM – 5 PM, F 9 AM – 2 PM
Click here to upload files.
The information contained herein is confidential and may be privileged and is intended only for the individual or entity to whom it is addressed. Any unauthorized use, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify me immediately.
From: clientwh...@googlegroups.com <clientwh...@googlegroups.com> On Behalf Of Lee Reams
Sent: 07/08/2024 8:30 AM
To: 'dbe...@aol.com' via ClientWhysConnect <clientwh...@googlegroups.com>
Subject: Re: [clientwhysconnect] Estimated Payments - Yes or No
Gregg,
You are correct, no estimates are required. If your client had no tax liability in the prior year and was a U.S. citizen or resident for the entire year, they are not required to make estimated tax payments. The same rule applies to CA if they were a CA resident the entire prior year. Other considerations might be whether the prior year return might be prone to audit and the tax not being zero, and how responsible is the client to setting aside the tax liability and spend or obligate it before the time comes to pay the taxes.
On Jul 7, 2024, at 4:52 PM, Gregg Lawless <glaw...@outlook.com> wrote:
Client has had no tax liability to IRS or CA for the past few years. However they are selling a rental in 2024 and will owe approx. $120,000 to the IRS and $50,000 to CA. Based on the requirements for estimates I do not believe any estimate is REQUIRED. However, I’m thinking it might be wise to make a nominal estimate after the close of escrow. THOUGHTS??
<image001.png>
To view this discussion on the web visit https://groups.google.com/d/msgid/clientwhysconnect/SA1PR20MB74865ADDBEA2093DFA3DED44BDDA2%40SA1PR20MB7486.namprd20.prod.outlook.com.
Gregg Lawless
Lee and Matthew, THANKS for the confirmations. Matthew THANKS for the item on CA. I was not aware of that high income item. That could have cost me a fortune. Fortunately my client will not exceed the $1,000,000 mark. He anticipates having a taxable profit of over $500,000 on the sale of his rental and his other income has not been significant the past few years. I will be discussing that he NEEDS to set aside the funds from the sale. It’s just that I don’t want him to make big payments when he can earn a good return on the amount he owes for the next 6-9 months if he merely places the funds in a high interest bearing account.
THANKA again.
Gregg Lawless
To view this discussion on the web visit https://groups.google.com/d/msgid/clientwhysconnect/SA1PR20MB74865ADDBEA2093DFA3DED44BDDA2%40SA1PR20MB7486.namprd20.prod.outlook.com.
Roger Mies
Lee and Matthew, THANKS for the confirmations. Matthew THANKS for the item on CA. I was not aware of that high income item. That could have cost me a fortune. Fortunately my client will not exceed the $1,000,000 mark. He anticipates having a taxable profit of over $500,000 on the sale of his rental and his other income has not been significant the past few years. I will be discussing that he NEEDS to set aside the funds from the sale. It’s just that I don’t want him to make big payments when he can earn a good return on the amount he owes for the next 6-9 months if he merely places the funds in a high interest bearing account.
THANKA again.
Gregg Lawless
From: clientwh...@googlegroups.com [mailto:clientwh...@googlegroups.com] On Behalf Of Matthew Bigelow
Sent: Monday, July 8, 2024 8:38 AM
To: clientwh...@googlegroups.com
Subject: RE: [clientwhysconnect] Estimated Payments - Yes or No
I once made a costly mistake when a client’s sale of their business pushed them into a “High Income” category for CA estimated tax payment requirements. I’d based the client’s estimates on the prior year, not realizing there were some exceptions to this rule. Essentially, if the current year’s CA adjusted gross income exceeds certain limits, they must make estimated payments based on the current year income and not prior year. See the following link about 2/3rds of the way down the page: https://www.ftb.ca.gov/pay/estimated-tax-payments.html
Matthew Bigelow, E.A.
JLZ Business Services, Inc.
Ph. (805) 643-3295, Fax: (805) 643-3297
email: mbig...@jlzinc.com
Web: www.jlzinc.com
Office Hours: M – TH 9 AM – 5 PM, F 9 AM – 2 PM
Click here to upload files.
The information contained herein is confidential and may be privileged and is intended only for the individual or entity to whom it is addressed. Any unauthorized use, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify me immediately.
From: clientwh...@googlegroups.com <clientwh...@googlegroups.com> On Behalf Of Lee Reams
Sent: 07/08/2024 8:30 AM
To: 'dbe...@aol.com' via ClientWhysConnect <clientwh...@googlegroups.com>
Subject: Re: [clientwhysconnect] Estimated Payments - Yes or No
Gregg,
You are correct, no estimates are required. If your client had no tax liability in the prior year and was a U.S. citizen or resident for the entire year, they are not required to make estimated tax payments. The same rule applies to CA if they were a CA resident the entire prior year. Other considerations might be whether the prior year return might be prone to audit and the tax not being zero, and how responsible is the client to setting aside the tax liability and spend or obligate it before the time comes to pay the taxes.
On Jul 7, 2024, at 4:52 PM, Gregg Lawless <glaw...@outlook.com> wrote:
Client has had no tax liability to IRS or CA for the past few years. However they are selling a rental in 2024 and will owe approx. $120,000 to the IRS and $50,000 to CA. Based on the requirements for estimates I do not believe any estimate is REQUIRED. However, I’m thinking it might be wise to make a nominal estimate after the close of escrow. THOUGHTS??
<image001.png>
To view this discussion on the web visit https://groups.google.com/d/msgid/clientwhysconnect/LV8PR22MB483695C68DAB8588951318C5FADA2%40LV8PR22MB4836.namprd22.prod.outlook.com.
Gregg Lawless
Good point Roger. Unfortunately the $10,000 limit on state & local taxes plays havoc with itemizing for federal anymore. His real estate taxes exceed the $10,000 now so really no benefit there for at least 2024 and 2025. Hopefully that will change after 2025. THANKS for checking on that.
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Matthew Bigelow
Hadn’t thought of Roger’s suggestion, but that’s a very good point for anyone who can take advantage of the tax payment for a deduction on the federal return.
As far as investing the funds, I like to steer my clients fortunate enough to have some short-term investable money into T-bills. Unlike a savings account, the interest is non-taxable to CA, plus the rate is generally a little higher. If necessary, they can sell the funds early and forgo some of the interest in the case that they need the money right away, but they can also ladder their purchases by buying, say, one 4-week bill, one 8-week, one 17-week, one 26-week, or something along those lines. That way, they have a fairly steady stream of cash and probably don’t need to sell early. Just my 2 cents on how they can hopefully maximize the windfall before the tax bill comes due.
Matthew Bigelow, E.A.
JLZ Business Services, Inc.
Ph. (805) 643-3295, Fax: (805) 643-3297
email: mbig...@jlzinc.com
Web: www.jlzinc.com
Office Hours: M – TH 9 AM – 5 PM, F 9 AM – 2 PM
Click here to upload files.
The information contained herein is confidential and may be privileged and is intended only for the individual or entity to whom it is addressed. Any unauthorized use, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify me immediately.
To view this discussion on the web visit https://groups.google.com/d/msgid/clientwhysconnect/LV8PR22MB483624B1C0EE602DEDCD8729FADA2%40LV8PR22MB4836.namprd22.prod.outlook.com.