Welcome to Virtual Accounting and Tax!
Our mission is to provide small to medium-sized businesses with peace-of-mind as to their accounting, payroll, and tax filing needs. We understand the language of accounting and how it relates to taxation. With us in the picture, clients can stay focused on managing and growing their businesses. We also dedicate ourselves to providing honest, professional guidance to self-employed individuals and W2 filers.
Call us today! 1 (888) 609-0997
Why Choose Virtual Accounting And Tax
We have over 20 years’ experience with contractors, trades, retail sales, law practices, construction,
government contractors, real estate agents, property managers, renters, auto sales, mechanics, small-scale
manufacturing, entertainers, musicians, restaurants, catering services, landscaping, home owner associations,
nursing care, and self-employed medical professionals. We also work with retirees, high-wealth individuals,
trust and estates.
RMD’s to Charity Strategy
This is an effective strategy for donating to 501(c)(3) charities directly from your retirement account.
Quarterly Estimated Tax Payments For Self-Employed Individuals
Taxpayers who are self-employed should send in estimated quarterly tax payments to the IRS (and state, if applicable) to avoid owing a significant amount of taxes when filing by April 15th. Here are some points to consider:
If a self-employed individual anticipates earning $ 50,000 for a given year, approximately 20% of that ($ 10,000) should be set aside as money which needs to be paid for self-employment tax. In this example, the approximate federal estimated quarterly payment should be roughly ,000 per calendar quarter, with an additional $ 500 going to the state in the same fashion. The $ 2,000 per quarter federal estimated tax payment closely approximates the 15.4% tax rate self-employed individuals face every year. This strategy will bring you close to the “income tax break-even point” (so to speak) so that the additional amount of taxes a self-employed individual may owe at tax filing time will be much more manageable from a dollars and sense standpoint. Click on this link https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes for additional estimated tax guidance.
Mail estimated payments by their due date, but make sure your Q4 payment is mailed no later than mid-December of the current year so that it’s applied to your current, not upcoming, tax year. If you don’t do this, you run the risk of having your Q4 estimated payment being applied to the Q1 period for the following tax year. This means what you still may owe for the current year will need to be augmented by the Q4 estimated payment amount (which was erroneously applied to the upcoming year). As always, make sure the memo field of your personal check is annotated as to the quarter and the tax year.
When taxpayers receive a letter from the IRS saying they owe taxes for the prior year despite their sending quarterly estimated tax payments, they typically can’t make sense of the math until their tax professional points out to them that the estimated tax payment information the taxpayer gave their tax preparer for the filing year in question doesn’t “reconcile” with the payments the IRS processed, despite all payments clearing the taxpayer’s checking account. This generally means the IRS applied a payment to the following, not current, tax year.
Tax Withholdings For Pension and Taxable Annuity Distributions
It’s generally not a good idea to take distributions from a taxable retirement plan – like a 401(K) – and not have an appropriate amount of federal and state income taxes withheld from your distributions. This is no different from having taxes withheld from a paycheck or when making estimated tax payments to the IRS because a taxpayer might be self-employed. Click on this link for additional literature from the IRS on pension distributions: https://www.irs.gov/forms-pubs/about-form-w4p
Don’t be the one who thinks they’re smart and liquidate $ 150,000 in retirement money in one year and forget to have tax withholdings on those distributions. A mistake like this may end up costing a taxpayer approximately $ 30,000 in income taxes at tax filing time.
Federal and state tax withholdings for such distributions should be roughly 20% of total distributions. To make a federal tax withholding election, fill out a W4p prior to taking the distribution https://www.irs.gov/pub/irs-pdf/fw4p.pdf
As always, consult with a tax professional for clear guidance on what tax amounts to withhold.. A CPA will be able to project your anticipated tax liability for the tax year in question, and be able to provide sound guidance as to an appropriate strategy regarding taxable distributions.