Hey Ship -
Sorry, I neglected the last part of your question. The quarterly estimated taxes can be made on an as-needed basis and originally discussed or planned amounts with your accountant is not binding.
For example, 1st quarter estimates are due roughly at the same time as the previous years tax return is due; therefore, both are often paid around the same time. If most of your 'extra' income is predictable investment interest and dividends, it may be easy to estimate the 4 quarterly amounts in advance, and more often than not, will require minimal tweaking.
However, in your case, poker earnings are far from predictable. The government is aware of this and allows you to 'annualize' your estimated payments in the case that your income was not earned evenly throughout the year. For example, if you have no income after the 1st quarter, I don't think it makes sense to withhold any taxes on 'phantom' income you do not have. When I was a poker pro, I would evaluate my P&L quarterly and if needed, would make a calculated withholding while keeping the safe harbor rules in mind.
I guess this is a long-winded way of stating it's not a perfect science when the estimated taxes are highly variable. My only guidance would just be to pay as you go and adjust accordingly. Depending on your situation, the fee/penalty may not be material to you and even worth the time to plan around (I've tried to assist a few clients in minimizing the penalty but they insist on their willingness to pay a small penalty for not having to deal with estimates). Or, I have clients who pay everything in the 4th quarter even though the income was earned throughout the year. Although they run the risk of late payment interest that accrued in earlier quarters if income was earned then, by paying the tax due at year end, the late payment interest on taxes owed stops.
Note: If you have a down year, look at it more as an opportunity to withhold less throughout the following year (since you'll have to pay either 100% or 110% of your 'down' year tax amount to meet the Safe Harbor Rules) without the risk of penalties/interest. Utilize this opportunity to generate income that will help pay for your future tax ball.
Quote:
Originally Posted by ShipIt2WinIt
Hey Kibz, thanks for doing this thread.
So I filed as a pro gambler last year. I read a book by Russell Fox(tax guy who specializes in gamblers). I have a lot of expenses, is quickbooks self employed a good thing to use to keep track? One more quick question, do I need to pay quarterly taxes?
I expect that
1. I'll owe more than 1k
2. My withholding and refundable credits will cover less than 90% of my tax liability for this year
When I google "do I need to pay quarterly taxes" those 2 points seem to come up a lot. How does a professional gambler really ever know what's going to happen though?