Today TaxMama® hears from Chan in the TaxQuips Forum, with this question “If my business had an unexpected loss of $102k at end of year last year but I made my quarterly payments anyway – will I have a large refund or credit if so? Where did my tax dollars go? Why has my accountant made me pay in more money all year?
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Your accountant made you pay those estimated taxes all year for two reasons:
1) You had substantial profits last year – and those ES payments are based on last year’s taxes. Or in the last year for which your accountant has numbers (2011).
When did you give him the profit and loss statement for 2012? (If you are like some of my clients, I didn’t see those numbers until last week – and got some major surprises.
2) You didn’t have the good sense to meet with your accountant during the year to re-evaluate your required estimated taxes – and to discuss your losses, as they were incurred. If you had done that, two good things would have happened to you:
i) Your accountant would have told you to stop making those quarterly payments.
ii) Your accountant might have been able to give you some guidance on how to avoid more losses, or to increase your profits – or even suggested that this might be a good time to cut your losses and get out of the business.
(Note: If you WERE seeing your accountant and s/he didn’t do those two things noted above? Then you definitely need a better accountant.
You will get a tax refund for all those excess estimated tax payments. So, the sooner you get your bookkeeping together, the sooner you can file your tax return and get your money back.
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And remember, you can find answers to all kinds of questions about re-balancing your income taxes and other tax and business issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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3 thoughts on “Unexpected Loss”
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You’ve certainly gone through quite an ordeal.
The steps you need to take are too many and too detailed to answer here.
What I suggest you do is to look for an IRS-sponsored Tax Clinic near you.
They are often associated with colleges and universities, with the students
doing the work and the professors supervising.
You will get the guidance you need.
If you can’t find one…
start with IRS Form 4506T and check off every box on the form.
Enter as many years as you need (I think the form allows for 3 or 4 years at a time).
If you need more years’ data, add another page.
This form will ask the IRS to generate all the data have they have on your
income and account activity for each of those years.
You can use that as a starting point to generate tax returns for each year.
Hello, I am in a complete IRS mess. I am currently out of the country and have been for a year. However, I am a student but used to work in mortgages. Prior to the mortgage blunder, i had several properties and lost a great deal during the carash. in addition to losing all of my earnings, attempting to savethat which I eventually lost. I havent filed my taxes in many years and this was mainly due to the fact that I dont have the paperwork necessary to do it, nor the money to pay. I moved and someone broke into my place and took everything- literally including my laptop, all my receipts, past business files and everything else I would need to file my taxes. Last I checked the IRS showed I owed something like $700,000. My question is, where do I start because I cant afford to hire anyone to file for me. I would appreciate all the help you can offer. thank you.