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VickiC
Rocking the party
Member since 5/05 4937 total posts
Name:
Vicki
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Re: Kill me now
Posted by headoverheels
Posted by Bxgell2
Posted by Kara
I assume this is for a small business you own or that one or both of you is self-employed, right?
Ugh - good luck. I second the idea of a second opinion, and also the idea of considering finding a new accountant. You need someone more experienced and on top of things related to your particular situation.
Worst case, btw, if you really DO owe $25k, you should (if you prefer) be able to work out a payment plan with the IRS, instead of having to pay it lump sum.
Yes, my DH is self-employed. Kind of.
The accountant told us that if we put $23k into our IRA, we'll only owe the IRS $2k. So, I think that's what we'll do. Even though it's a huge chunk of money, it's basically just shifting it from our personal savings to our retirement savings.
But I can say buh-bye to our nice little rainy day cushion.
Oy gevult.
wow - i had no idea that was even possible. you can just move money into an IRA and not owe the IRS as much?
Sure - you have until April 15th to make a contribution to retirement savings for the previous year.
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Posted 3/18/08 3:58 PM  |
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Bxgell2
Perfection
Member since 5/05 16438 total posts
Name:
Beth
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Re: Kill me now
Posted by headoverheels
wow - i had no idea that was even possible. you can just move money into an IRA and not owe the IRS as much?
Yes, that's what we're going to do, but still that requires taking $25,000.00 from somewhere and moving it into an IRA. 
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| Posted 3/18/08 3:58 PM |
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bomb-blast
bye bye
Member since 11/06 1327 total posts
Name:
Leo
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Re: Kill me now
Posted by headoverheels
wow - i had no idea that was even possible. you can just move money into an IRA and not owe the IRS as much?
this is true. but as with anything else the IRS does, there are limits. It's not a dollar for dollar reduction.
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| Posted 3/18/08 4:01 PM |
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Kara
Now Zagat Rated!
Member since 3/07 13217 total posts
Name:
They call me "Tater Salad"
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Re: Kill me now
Posted by Bxgell2
Posted by headoverheels
wow - i had no idea that was even possible. you can just move money into an IRA and not owe the IRS as much?
Yes, that's what we're going to do, but still that requires taking $25,000.00 from somewhere and moving it into an IRA.
I am by no means an expert, but I did not think there were any IRAs that allow that large of a contribution annually. In fact, even if it were going into 2 IRAs, I don't see how that large of a contribution is possible...
401(k)s last year had a limit of $15,500 I think. IRAs, to my knowledge, have limits far below that.
I'm just curious to know how one can make such a large contribution in one year...
ETA -- I'm certainly not asking you for your personal financial information. I'm just curious to know how something like this would work. Certainly fine if you aren't comfortable sharing. 
Message edited 3/18/2008 4:02:25 PM.
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| Posted 3/18/08 4:01 PM |
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Laura1976
Member since 5/05 5754 total posts
Name:
Laura
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Re: Kill me now
Posted by headoverheels
wow - i had no idea that was even possible. you can just move money into an IRA and not owe the IRS as much?
it doesn't work that way for a regular tax return, if you own your own business its a different story. For just an individual tax return or a joint where both of you have regular jobs that you receive a W-2 for, you max out IRA contributions at $5000 in most cases. Opening an IRA or making a contribution, might reduce the amount you owe by 1k or maybe 2K, it won't be as drastic of a change as a small business owner.
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| Posted 3/18/08 4:01 PM |
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Shelly
She's 7!!!
Member since 8/05 14624 total posts
Name:
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Re: Kill me now
I would shop around for a new accountant. He should have advised you of this possibility and given you advanced notice of what could happen, and what you can do to prevent it.
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| Posted 3/18/08 4:01 PM |
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VickiC
Rocking the party
Member since 5/05 4937 total posts
Name:
Vicki
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Re: Kill me now
Kara - I think you're correct. Now that I think about it. I thought you had a limit of only $5,000 per IRA depending on your age?
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| Posted 3/18/08 4:02 PM |
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MsMBV
:P
Member since 5/05 28602 total posts
Name:
Me
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Re: Kill me now
Posted by Kara
I assume this is for a small business you own or that one or both of you is self-employed, right?
Ugh - good luck. I second the idea of a second opinion, and also the idea of considering finding a new accountant. You need someone more experienced and on top of things related to your particular situation.
Worst case, btw, if you really DO owe $25k, you should (if you prefer) be able to work out a payment plan with the IRS, instead of having to pay it lump sum.
Great suggestions both.
 beth, that is just crazy.
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| Posted 3/18/08 4:05 PM |
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Ophelia
she's baaccckkkk ;)
Member since 5/06 23378 total posts
Name:
remember, when Gulliver traveled....
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Re: Kill me now
Posted by Shelly
I would shop around for a new accountant. He should have advised you of this possibility and given you advanced notice of what could happen, and what you can do to prevent it.
if she were giving him updated income information for the quarterly estimates, I could see him being at fault...but if she gave him no info, he had no choice really but to go by last years for the estimates...
I am not sure it is entirely in his court why this happened.... 
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| Posted 3/18/08 4:07 PM |
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cazhley
I ♥ cheesiness.
Member since 1/07 1429 total posts
Name:
Cassie
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Re: Kill me now
I have a SEP-IRA for self-employed people. You can contribute up to 25% of earnings or up to $45,000. (I think... don't quote me...lol)
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| Posted 3/18/08 4:08 PM |
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Bxgell2
Perfection
Member since 5/05 16438 total posts
Name:
Beth
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Re: Kill me now
Posted by cazhley
I have a SEP-IRA for self-employed people. You can contribute up to 25% of earnings or up to $45,000. (I think... don't quote me...lol)
That's exactly what we're doing - DH has a SEP-IRA because he is self-employed. We were advised by the accountant that the maximum we can put into it is $23k. If we do that, we'll have to pay the remaining $2k to the IRS.
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| Posted 3/18/08 4:09 PM |
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headoverheels
s'il vous plaît
Member since 6/07 42079 total posts
Name:
LB
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Re: Kill me now
Posted by Bxgell2
Posted by cazhley
I have a SEP-IRA for self-employed people. You can contribute up to 25% of earnings or up to $45,000. (I think... don't quote me...lol)
That's exactly what we're doing - DH has a SEP-IRA because he is self-employed. We were advised by the accountant that the maximum we can put into it is $23k. If we do that, we'll have to pay the remaining $2k to the IRS.
this is good information to have... beth i am sorry, this stinks, but at least you won't "lose" as much money in the long run.
Message edited 3/18/2008 4:11:14 PM.
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| Posted 3/18/08 4:11 PM |
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Bxgell2
Perfection
Member since 5/05 16438 total posts
Name:
Beth
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Re: Kill me now
Posted by Ophelia
Posted by Shelly
I would shop around for a new accountant. He should have advised you of this possibility and given you advanced notice of what could happen, and what you can do to prevent it.
if she were giving him updated income information for the quarterly estimates, I could see him being at fault...but if she gave him no info, he had no choice really but to go by last years for the estimates...
I am not sure it is entirely in his court why this happened....
It's not entirely his fault. It's our fault for not meeting with him halfway through the year and going through everything to make sure we were making the right estimates.
But, when you're told you owe $25k, again, your first instinct is to hit someone. I'd much rather hit him than myself right now.
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| Posted 3/18/08 4:11 PM |
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evnme
My little lamb
Member since 8/05 12633 total posts
Name:
aka momma2b
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Re: Kill me now
 
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| Posted 3/18/08 4:12 PM |
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Ophelia
she's baaccckkkk ;)
Member since 5/06 23378 total posts
Name:
remember, when Gulliver traveled....
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Re: Kill me now
Posted by Bxgell2
Posted by Ophelia
Posted by Shelly
I would shop around for a new accountant. He should have advised you of this possibility and given you advanced notice of what could happen, and what you can do to prevent it.
if she were giving him updated income information for the quarterly estimates, I could see him being at fault...but if she gave him no info, he had no choice really but to go by last years for the estimates...
I am not sure it is entirely in his court why this happened....
It's not entirely his fault. It's our fault for not meeting with him halfway through the year and going through everything to make sure we were making the right estimates.
But, when you're told you owe $25k, again, your first instinct is to hit someone. I'd much rather hit him than myself right now.
oh, I understand that.
I am just saying...maybe he shouldn't be fired is all.
I'd be shooting flames through my nostrils right now.
though also  that we made enough to owe that much more
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| Posted 3/18/08 4:13 PM |
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Karen
Just chillin'!!
Member since 1/06 9690 total posts
Name:
Karen
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Re: Kill me now
Posted by Bxgell2
Posted by cazhley
I have a SEP-IRA for self-employed people. You can contribute up to 25% of earnings or up to $45,000. (I think... don't quote me...lol)
That's exactly what we're doing - DH has a SEP-IRA because he is self-employed. We were advised by the accountant that the maximum we can put into it is $23k. If we do that, we'll have to pay the remaining $2k to the IRS.
I would double-check that. IRA contributions are not credits - they don't reduce your tax bill dollar for dollar. If you owe $25k now, there is no way making a $23k IRA contribution will reduce your tax bill all the way down to $2k.
The IRA contribution will just reduce your Adjusted Gross Income by $23k, not your tax bill. Unless there are some small business owner rules I'm not remembering right now.
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| Posted 3/18/08 4:15 PM |
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bicosi
life is a carousel
Member since 7/07 14956 total posts
Name:
M
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Re: Kill me now
Posted by cazhley
I have a SEP-IRA for self-employed people. You can contribute up to 25% of earnings or up to $45,000. (I think... don't quote me...lol)
Yup. You're right. There are also individual 401k's.
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| Posted 3/18/08 4:16 PM |
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Michelle
My Little Yankee Fans
Member since 1/06 4018 total posts
Name:
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Re: Kill me now
The quarterly payments you make are only to avioid penalty, based on the tax from the prior year. No need to give the gov't more money tax free then is required. Makes more sense to owe at the end of the year then to get a big refund. The IRS doens't pay interest on it.
Did you let your accountant know during the year that your income was significantly different?
If you are owing that much in taxes, that you must be making a big profit, so that is something to be glad about.
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| Posted 3/18/08 4:21 PM |
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Kara
Now Zagat Rated!
Member since 3/07 13217 total posts
Name:
They call me "Tater Salad"
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Re: Kill me now
Posted by Bxgell2
Posted by cazhley
I have a SEP-IRA for self-employed people. You can contribute up to 25% of earnings or up to $45,000. (I think... don't quote me...lol)
That's exactly what we're doing - DH has a SEP-IRA because he is self-employed. We were advised by the accountant that the maximum we can put into it is $23k. If we do that, we'll have to pay the remaining $2k to the IRS.
Aaaah, that makes sense. Thanks for clarifying! 
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| Posted 3/18/08 4:25 PM |
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bomb-blast
bye bye
Member since 11/06 1327 total posts
Name:
Leo
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Re: Kill me now
As a general rule, since nobody wants to be calling their acct everytime they get a big distribution, we usually tell people to automatically send a certain % of the income to the IRS and state. This way you won't wind up with any big surprises at the end of the year, and you're also not tempted to go out and spend the money, unless you absolutely have to. You can still owe penalties even if you pay in enough to cover the prior year.
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| Posted 3/18/08 4:27 PM |
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pinkandblue
Our family is complete, maybe
Member since 9/05 32436 total posts
Name:
Stephanie
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Re: Kill me now
Posted by bomb-blast
Posted by Bxgell2
I know this.
But right now all I want to do is punch someone in the face. And he's the first person that comes to mind 
You can punch him...you're still gonna have to pay though. Sorry.
She never said she was not going to pay it....I think she still has a right to be ******  I would die if I had to pay that much
Message edited 3/18/2008 4:29:46 PM.
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| Posted 3/18/08 4:27 PM |
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MarathonKnitter
HAPPY
Member since 2/07 17374 total posts
Name:
EMBRACING CHANGE
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Re: Kill me now
wow!
i can only think to say: thank God you had enough income this year to owe that much in taxes.
wow!
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| Posted 3/18/08 4:28 PM |
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yankinmanc
Happy Days!
Member since 8/05 18208 total posts
Name:
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Re: Kill me now
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OMG I will stick a check in the mail for ya!!
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| Posted 3/18/08 4:28 PM |
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Bxgell2
Perfection
Member since 5/05 16438 total posts
Name:
Beth
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Re: Kill me now
Posted by bomb-blast
As a general rule, since nobody wants to be calling their acct everytime they get a big distribution, we usually tell people to automatically send a certain % of the income to the IRS and state. This way you won't wind up with any big surprises at the end of the year, and you're also not tempted to go out and spend the money, unless you absolutely have to. You can still owe penalties even if you pay in enough to cover the prior year.
Dh takes a monthly distribution - so you mean send a portion of every single distribution to the IRS and State, instead of doing the quarterly estimates? Or on top of that?
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| Posted 3/18/08 4:29 PM |
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Michelle
My Little Yankee Fans
Member since 1/06 4018 total posts
Name:
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Re: Kill me now
Posted by stephanief
Posted by bomb-blast
Posted by Bxgell2
I know this.
But right now all I want to do is punch someone in the face. And he's the first person that comes to mind
You can punch him...you're still gonna have to pay though. Sorry.
can I ask why you keep saying this? She never said she was not going to pay it....I think she still has a right to be ****** I would die if I had to pay that much
Why does she have a right to be ****** at her accountant when she did not keep him/her up to date on her income. She owes so much because she made money, it is not like the accountant is getting a cut oif the $25,000. The accountant doens't decide what people owe, your income and deductions are what they are.
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| Posted 3/18/08 4:30 PM |
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