WWTBAM Bored

Does anyone understand them and know when they have to be made?

I am in the process of filing my 2007 taxes. I am getting a pretty significant refund but filed an extension because I had a lot of non-cash charitable contributions to organize. Plus I figured I'd put the refund toward my 2008 taxes, since the Millionaire people don't take taxes out. It's nice to get the big check, but I really wish they did that part for you.

So I'm trying to figure out how much I have to pay and when, to make sure there are no penalties next year. Someone told me I have to pay in 110% of my 2007 tax liability to cover myself, but is that enough, or do I have to account for the money I made on Millionaire too?

I think if I use my 2007 refund, combined with the normal overage from the amount coming out of my paycheck, I should be covered (it just means no actual refund paid to me for 07 or 08 ), but I want to make sure I'm doing all the right things.

Any advice from game show winners or anyone having current tax law knowledge would be much appreciated!!

sunflower wrote:Does anyone understand them and know when they have to be made?

I am in the process of filing my 2007 taxes. I am getting a pretty significant refund but filed an extension because I had a lot of non-cash charitable contributions to organize. Plus I figured I'd put the refund toward my 2008 taxes, since the Millionaire people don't take taxes out. It's nice to get the big check, but I really wish they did that part for you.

So I'm trying to figure out how much I have to pay and when, to make sure there are no penalties next year. Someone told me I have to pay in 110% of my 2007 tax liability to cover myself, but is that enough, or do I have to account for the money I made on Millionaire too?

I think if I use my 2007 refund, combined with the normal overage from the amount coming out of my paycheck, I should be covered (it just means no actual refund paid to me for 07 or 08 ), but I want to make sure I'm doing all the right things.

Any advice from game show winners or anyone having current tax law knowledge would be much appreciated!!

Nevermind, you were asking for current tax law knowledge.

Be patient, I guarantee you someone here knows the answer. Not me, but somebody will.

sunflower wrote:Does anyone understand them and know when they have to be made?

I am in the process of filing my 2007 taxes. I am getting a pretty significant refund but filed an extension because I had a lot of non-cash charitable contributions to organize. Plus I figured I'd put the refund toward my 2008 taxes, since the Millionaire people don't take taxes out. It's nice to get the big check, but I really wish they did that part for you.

So I'm trying to figure out how much I have to pay and when, to make sure there are no penalties next year. Someone told me I have to pay in 110% of my 2007 tax liability to cover myself, but is that enough, or do I have to account for the money I made on Millionaire too?

I think if I use my 2007 refund, combined with the normal overage from the amount coming out of my paycheck, I should be covered (it just means no actual refund paid to me for 07 or 08 ), but I want to make sure I'm doing all the right things.

Any advice from game show winners or anyone having current tax law knowledge would be much appreciated!!

You don't want to use estimated taxes. You want to use withholding. To use estimated taxes, you need to make equal and on-time payments. Assuming that you didn't make an April 2008 estimated tax payment, it's already too late to add estimated tax payments to the mix.

If the adjusted gross income shown on your 2007 federal income tax return was no more than $150,000, then you need to withhold at least 100% of your 2007 tax liability to satisfy the safe harbor and avoid underwithholding penalties. (Of course, you'll still owe the balance in April 2009, so be sure to put aside the money you'll need.) If your adjusted gross income was more than $150,000, then you need to withhold at least 110% of your 2007 tax liability. If you really want to use estimated taxes as well, it can be done, but you'll need to do a lot more paperwork and arithmetic. Essentially, you'll need to demonstrate that you paid the appropriate amount of estimated taxes in the quarter in which the income arrived.

There's a very good message board (which I frequent) at the Motley Fool devoted to this subject. Look for the Tax Strategies board. You'll need to convince a real live human being that you're not a troll before they'll let you post, but it doesn't take long and it's not that hard. --Bob

Bob78164 wrote:

sunflower wrote:Does anyone understand them and know when they have to be made?

I am in the process of filing my 2007 taxes. I am getting a pretty significant refund but filed an extension because I had a lot of non-cash charitable contributions to organize. Plus I figured I'd put the refund toward my 2008 taxes, since the Millionaire people don't take taxes out. It's nice to get the big check, but I really wish they did that part for you.

So I'm trying to figure out how much I have to pay and when, to make sure there are no penalties next year. Someone told me I have to pay in 110% of my 2007 tax liability to cover myself, but is that enough, or do I have to account for the money I made on Millionaire too?

I think if I use my 2007 refund, combined with the normal overage from the amount coming out of my paycheck, I should be covered (it just means no actual refund paid to me for 07 or 08 ), but I want to make sure I'm doing all the right things.

Any advice from game show winners or anyone having current tax law knowledge would be much appreciated!!

You don't want to use estimated taxes. You want to use withholding. To use estimated taxes, you need to make equal and on-time payments. Assuming that you didn't make an April 2008 estimated tax payment, it's already too late to add estimated tax payments to the mix.

If the adjusted gross income shown on your 2007 federal income tax return was no more than $150,000, then you need to withhold at least 100% of your 2007 tax liability to satisfy the safe harbor and avoid underwithholding penalties. (Of course, you'll still owe the balance in April 2009, so be sure to put aside the money you'll need.) If your adjusted gross income was more than $150,000, then you need to withhold at least 110% of your 2007 tax liability. If you really want to use estimated taxes as well, it can be done, but you'll need to do a lot more paperwork and arithmetic. Essentially, you'll need to demonstrate that you paid the appropriate amount of estimated taxes in the quarter in which the income arrived.

There's a very good message board (which I frequent) at the Motley Fool devoted to this subject. Look for the Tax Strategies board. You'll need to convince a real live human being that you're not a troll before they'll let you post, but it doesn't take long and it's not that hard. --Bob

AWESOME...thank you!!!

That means I can actually get my 2007 refund back!! Yeah!!

I'm really glad I asked. Yes, I have it set up that my employer takes a good chunk out so that I get a nice return every year. So I think that's at about 120% of my 2007 tax liability, so I should be covered there, then I just have to pay the balance at tax time? And I get to hold onto the money until April of next year, and just pay it when I file my tax return? I like that!!

So, I just want to make sure, even though I know I am making $25k more this year than last year (my WWTBAM winnings), I don't have to worry about it, I just think in terms of the 2007 numbers? Just making sure!!

Thanks, Bob!!!!

sunflower wrote:

Bob78164 wrote:

sunflower wrote:Does anyone understand them and know when they have to be made?

I am in the process of filing my 2007 taxes. I am getting a pretty significant refund but filed an extension because I had a lot of non-cash charitable contributions to organize. Plus I figured I'd put the refund toward my 2008 taxes, since the Millionaire people don't take taxes out. It's nice to get the big check, but I really wish they did that part for you.

So I'm trying to figure out how much I have to pay and when, to make sure there are no penalties next year. Someone told me I have to pay in 110% of my 2007 tax liability to cover myself, but is that enough, or do I have to account for the money I made on Millionaire too?

I think if I use my 2007 refund, combined with the normal overage from the amount coming out of my paycheck, I should be covered (it just means no actual refund paid to me for 07 or 08 ), but I want to make sure I'm doing all the right things.

Any advice from game show winners or anyone having current tax law knowledge would be much appreciated!!

You don't want to use estimated taxes. You want to use withholding. To use estimated taxes, you need to make equal and on-time payments. Assuming that you didn't make an April 2008 estimated tax payment, it's already too late to add estimated tax payments to the mix.

If the adjusted gross income shown on your 2007 federal income tax return was no more than $150,000, then you need to withhold at least 100% of your 2007 tax liability to satisfy the safe harbor and avoid underwithholding penalties. (Of course, you'll still owe the balance in April 2009, so be sure to put aside the money you'll need.) If your adjusted gross income was more than $150,000, then you need to withhold at least 110% of your 2007 tax liability. If you really want to use estimated taxes as well, it can be done, but you'll need to do a lot more paperwork and arithmetic. Essentially, you'll need to demonstrate that you paid the appropriate amount of estimated taxes in the quarter in which the income arrived.

There's a very good message board (which I frequent) at the Motley Fool devoted to this subject. Look for the Tax Strategies board. You'll need to convince a real live human being that you're not a troll before they'll let you post, but it doesn't take long and it's not that hard. --Bob

AWESOME...thank you!!!

That means I can actually get my 2007 refund back!! Yeah!!

I'm really glad I asked. Yes, I have it set up that my employer takes a good chunk out so that I get a nice return every year. So I think that's at about 120% of my 2007 tax liability, so I should be covered there, then I just have to pay the balance at tax time? And I get to hold onto the money until April of next year, and just pay it when I file my tax return? I like that!!

So, I just want to make sure, even though I know I am making $25k more this year than last year (my WWTBAM winnings), I don't have to worry about it, I just think in terms of the 2007 numbers? Just making sure!!

Thanks, Bob!!!!

That's how it works for federal income taxes. I can't help you, though, regarding Connecticut state taxes. --Bob

Sweet.

Another question, which might be dumb. Do I have to pay taxes in NY for the prize winnings? I know when I worked in MA, I had to pay in both MA and CT. But I don't know how different game show winnings are from ordinary income?

sunflower wrote:Sweet.

Another question, which might be dumb. Do I have to pay taxes in NY for the prize winnings? I know when I worked in MA, I had to pay in both MA and CT. But I don't know how different game show winnings are from ordinary income?

What I was told in 2001 was that there is no New York state tax on WWTBaM winnings. I know that since that time, California has passed a law to specifically tax game show winners, but AFAIK New York does not have such a law.

I'll add one thing, since CT has an income tax: It may be in your interest to make a state estimated tax payment before the end of the calendar year if one of the following is true for you:

- You expect to itemize on your 2008 return, but may not be able to benefit from itemizing in 2009.
- You expect to be in a higher income tax bracket in 2008 than in 2009.

Other actions may include making charitable contributions and other deductible expenses before the calendar year is over. This is timing your itemized deductions for the greatest tax benefit, which will help as long as you are not hit with the A.M.T. as a result.



John C. aka Snaxx



.

jacorbett70 wrote:I'll add one thing, since CT has an income tax: It may be in your interest to make a state estimated tax payment before the end of the calendar year if one of the following is true for you:

- You expect to itemize on your 2008 return, but may not be able to benefit from itemizing in 2009.
- You expect to be in a higher income tax bracket in 2008 than in 2009.

Other actions may include making charitable contributions and other deductible expenses before the calendar year is over. This is timing your itemized deductions for the greatest tax benefit, which will help as long as you are not hit with the A.M.T. as a result.

John C. aka Snaxx



.

Is that definitely true, that I'd need to make estimated payments in those situations? I looked on the CT website and it sounded like it was similar to what Bob said for federal - as long as I pay 100% of my 2007 tax liability, I won't be penalized in 2008 for under-withholding. I took that to mean I'm okay holding off on my payment until tax time next year, which is great because then I can earn interest on the money until then. Granted, with the current rates, that won't be much...but better than letting them have it now, if I don't need to.

And I am an old pro at charitable contributions, hence the reason I am just filing my 2007 taxes now!!!

And I do itemize, but that doesn't matter for the CT portion, only the federal portion. CT allows very few deductions, in fact, they cap our property tax deduction at only $250 (that may vary based on income, but that's what I can deduct)...which is only a fraction of the property taxes I pay on my car and condo each year.

Thanks for the help!!

sunflower wrote:

jacorbett70 wrote:I'll add one thing, since CT has an income tax: It may be in your interest to make a state estimated tax payment before the end of the calendar year if one of the following is true for you:

- You expect to itemize on your 2008 return, but may not be able to benefit from itemizing in 2009.
- You expect to be in a higher income tax bracket in 2008 than in 2009.

Other actions may include making charitable contributions and other deductible expenses before the calendar year is over. This is timing your itemized deductions for the greatest tax benefit, which will help as long as you are not hit with the A.M.T. as a result.

John C. aka Snaxx



.

Is that definitely true, that I'd need to make estimated payments in those situations? I looked on the CT website and it sounded like it was similar to what Bob said for federal - as long as I pay 100% of my 2007 tax liability, I won't be penalized in 2008 for under-withholding. I took that to mean I'm okay holding off on my payment until tax time next year, which is great because then I can earn interest on the money until then. Granted, with the current rates, that won't be much...but better than letting them have it now, if I don't need to.

And I am an old pro at charitable contributions, hence the reason I am just filing my 2007 taxes now!!!

And I do itemize, but that doesn't matter for the CT portion, only the federal portion. CT allows very few deductions, in fact, they cap our property tax deduction at only $250 (that may vary based on income, but that's what I can deduct)...which is only a fraction of the property taxes I pay on my car and condo each year.

Thanks for the help!!

In all likelihood you will not need to make CT estimated payments, but if you wait and pay the extra amount due with your return, it is not considered a tax year 2008 deduction in the eyes of the IRS because it is being paid in 2009. Instead you would be able to deduct it on your 2009 return when you file.

Since no one's said it simply, I will: You don't need to pay estimated tax on your BAM winnings. The underpayment penalty applies only to earned income and that isn't.

Bob Juch wrote:Since no one's said it simply, I will: You don't need to pay estimated tax on your BAM winnings. The underpayment penalty applies only to earned income and that isn't.

That's false. The underpayment penalty applies, if at all, to any income. --Bob

Bob78164 wrote:

Bob Juch wrote:Since no one's said it simply, I will: You don't need to pay estimated tax on your BAM winnings. The underpayment penalty applies only to earned income and that isn't.

That's false. The underpayment penalty applies, if at all, to any income. --Bob

Maybe I should know better than to argue with a lawyer, but that's what the IRS told me when I asked about estimated taxes on my BAM winnings. I did not get an underpayment penalty at any rate.

I think, at any rate, I'm covered. As long as it's based on 2007 and not anticipated income for 2008, I can just go with my normal withholding from my paycheck and pay the difference next year.

Although it is probably good for future contestants to iron out those differences for certain.

Thank you all for your help! Now I will get to unexpectedly keep my 2007 refunds, which is a nice surprise. And I can sleep better knowing that what I'm doing is right and not opening me up for penalties and audits. I have a feeling an audit is coming soon, but I'm not scared of them, I just want to make sure I do everything right each year so that when the audit comes, they don't find anything!!

Bob Juch wrote:

Bob78164 wrote:

Bob Juch wrote:Since no one's said it simply, I will: You don't need to pay estimated tax on your BAM winnings. The underpayment penalty applies only to earned income and that isn't.

That's false. The underpayment penalty applies, if at all, to any income. --Bob

Maybe I should know better than to argue with a lawyer, but that's what the IRS told me when I asked about estimated taxes on my BAM winnings. I did not get an underpayment penalty at any rate.

With apologies to Snaxx, the IRS is notorious for getting over-the-phone advice wrong all the time. I have no trouble believing someone at the IRS said this. But if they did, they were wrong. --Bob

I kept an extra $1,860,000 income from WWTBAM in the bank from 8/17/01 to 4/15/02. On 4/15/02, I mailed a check for more than $700,000 to the IRS. At no point did I communicate with the IRS or pay any penalties. I just did whatever TurboTax told me to do. I'm sure you'll be fine. Don't worry about it. Just set aside enough money to pay your extra taxes on 4/15/09.

Bob78164 wrote:

Bob Juch wrote:

Bob78164 wrote:That's false. The underpayment penalty applies, if at all, to any income. --Bob

Maybe I should know better than to argue with a lawyer, but that's what the IRS told me when I asked about estimated taxes on my BAM winnings. I did not get an underpayment penalty at any rate.

With apologies to Snaxx, the IRS is notorious for getting over-the-phone advice wrong all the time. I have no trouble believing someone at the IRS said this. But if they did, they were wrong. --Bob

What I've found online doesn't distinguish between earned and unearned income but does say that if you pay at least 100% of the tax you paid the previous year you're safe. I did that so had no penalty.

I was paying quarterly estimated taxes when I was a consultant for twelve years, but had my accountant tell me how much to pay.

Bob78164 wrote:

Bob Juch wrote:

Bob78164 wrote:That's false. The underpayment penalty applies, if at all, to any income. --Bob

Maybe I should know better than to argue with a lawyer, but that's what the IRS told me when I asked about estimated taxes on my BAM winnings. I did not get an underpayment penalty at any rate.

With apologies to Snaxx, the IRS is notorious for getting over-the-phone advice wrong all the time. I have no trouble believing someone at the IRS said this. But if they did, they were wrong. --Bob

When I saw that advice I was like "I hope it wasn't my call site," where I am on the quality assurance team.