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First year FIRE'd and taxes - is it really this simple?
12-27-2014, 04:19 PM
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#1
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Full time employment: Posting here.
Join Date: Jan 2014
Location: Austin
Posts: 661
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First year FIRE'd and taxes - is it really this simple?
I FIRE'd at the end of May; at that time my federal withholding kept pace with my salary.
I worked P/T until the end of August; again my federal withholding kept pace with my salary.
The amount withheld seems to satisfy my tax obligation for total earned income during that period according to TaxCaster.
But from 9/1 until now when all of my Vanguard distributions have completed, the dividends and capital gains distributions I've received from my after-tax accounts have been substantial. TaxCaster estimates I'll owe an additional $11,500.
9/1 thru 12/31 correlates to the IRS's 4th reporting period. So is it really as simple as just sending in a 1040ES with a check for $11.5K by January 15th?
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ER'd 6/1/2014 @ age 53. Wow, is it already 2022?
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12-27-2014, 04:38 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Feb 2007
Posts: 2,599
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At this point, yes. For next year, you may want to consider making quarterly estimated payments to avoid the year-end surprise, and perhaps an underpayment penalty.
-- Rita
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Only got A dimple, would have preferred 2!
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12-27-2014, 05:11 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Apr 2011
Location: Madison
Posts: 1,337
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Vanguard can deduct taxes from your distributions. I have this done so that I am pretty close to $0 taxes owed at the end of the year.
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Wild Bill shoulda taken more out of his IRA when he could have. . . .
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12-27-2014, 05:47 PM
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#4
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Full time employment: Posting here.
Join Date: Jan 2014
Location: Austin
Posts: 661
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Quote:
Originally Posted by Gotadimple
At this point, yes. For next year, you may want to consider making quarterly estimated payments to avoid the year-end surprise, and perhaps an underpayment penalty.
-- Rita
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Good point - although without the six-figure salary the tax hit won't be quite so large.
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ER'd 6/1/2014 @ age 53. Wow, is it already 2022?
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12-28-2014, 06:31 AM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,314
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I just adjust my Federal withholdings each year to cover anticipated DC and Federal taxes for me and DW. DW has some partnership income that requires SS self employment payments as well as income tax, and we too have VG distributions, but the Fed deduction covers it all. I find that simpler than worrying about quarterly payments. You can specify specific monthly dollar amounts for Federal and state taxes so it is easy to tweak in mid April if you conclude that you are running a bit low or high for the next year.
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Idleness is fatal only to the mediocre -- Albert Camus
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12-28-2014, 07:18 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Quote:
Originally Posted by Looking4Ward
....9/1 thru 12/31 correlates to the IRS's 4th reporting period. So is it really as simple as just sending in a 1040ES with a check for $11.5K by January 15th?
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Yes. In fact, you don't even really have to do a 1040 ES. You could just send them a check with a payment voucher with your name and TIN. Or just a check with your TIN and 4Q14 est payment in the memo section of the check (not recommended though). Or register for their electronic estimated payment system and do it via electronic transfer.
But for 2015, do a pro forma return of your 2015 income and deductions using Taxcaster or TurboTax. If you are in the 15% tax bracket the qualified dividends will be tax-free so your taxes may be a lot lower than while you were working. If you will have SS or a pension in 2015, it may bump you up over the 15% tax bracket and those qualified dividends will be taxed at 15%.
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If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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