Gate is now open for a new carnival
Putting off today what you can put off tomorrow

Taxes, taxes and more taxes

Taxforms_calc_2 Bogged down a bit today, trying to finish up our personal 1040, get a self-employed retirement account established and working on some stories for paying clients so I can stay self-employed.

One out of three ain't bad. I set up the SEP.

Have you looked at all the retirement options out there for self-employed folks? Probably not. Like the overstuffed shelves at your local grocery store, there are beaucoup choices. This Miami Herald story offers an overview.

I wouldn't have looked at the possibilities either except that I had to. And by "had to" I mean that a self-employed retirement plan is a great way to (a) save for the eventual day when I can quit working and (b) provide an immediate tax deduction.

This time of year, reason (b) is a great motivator. Even though it means a hit to our checking account today, it also means a little less in the IRS pocket this year, and at least the money is going to come back to me eventually.

So that leaves me still needing to (1) finish up our 2005 taxes here in the next few days and (2) complete my story assignments.

A word to my bosses, whom I know diligently read Don’t Mess With Taxes: No worries. Sleep is for sissies! I will have the stories in your e-mail boxes shortly.

As for my own taxes, we'll see what the next few days bring.

I might opt for a filing extension (more about this in a coming blog entry), which this year is an automatic six-month reprieve. The only downside: If my down-and-dirty stab at our 1040 shows we owe, I'll have to send that money along with the extension request. Uncle Sam gives us more time to file the paperwork, but not to come up with any taxes due.

I think we're OK. We didn't have too much of a gap in homeownership last year, so we still have all those deductions (details here) to write off.

Also, we pay estimated taxes every year to cover some investment income we have.

No, we're not Rockefellers living on our vast holdings, but reinvesting dividends and capital gains tends to produce enough money to make the tax collector take notice. So we send in the quarterly 1040ES vouchers.

And after I stopped getting a regular from-the-man paycheck that included withholding taxes, I adjusted our estimated payments to also cover the big bucks (I wish!) I'm now raking in as a sole proprietor.

Which brings me to the "more taxes" of this entry's title: estimated taxes.

If you make these payments, too, either because you're self-employed or have other money coming in that's not subject to withholding, the deadline for the first 2006 payment is next Monday, the regular annual filing due date.

There's no extension for estimated taxes. If you received untaxed money in January, February or March, you need to send the IRS its cut by April 17. If you don't, you could be hit with late payment penalties and interest.

More on the why, where for and how of estimated taxes in this story I wrote for Bankrate.com.

I mention in there the option of making the quarterly payments electronically via the EFTP system. Since I pay all our other bills online (except for one stray local utility that still hasn't gone electronic), I'm going to check this out before the second estimated tax payment is due in June.

Fellow personal finance blogger MyMoneyBlog reports that he's happy so far with the system. I suspect I'll soon be joining him in the 21st century tax-paying world.

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