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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 4161
Experience:  Providing Financial, Tax & Business advice since 1986
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i live in new york and earn my living on straight commission.

Resolved Question:

i live in new york and earn my living on straight commission. because my sales are done by telephone and i do not have sufficient write offs, i will be subject to a large tax bill. this is the first year i am actually having some success and wanted to know what percentage of pay should i allocate on the side for tax purposes. commissions are paid to an s corp domiciled in new york (suffolk county)
Submitted: 1 year ago.
Category: Finance
Expert:  Lane replied 1 year ago.

Lane :

Hi,

Lane :

When you do you S-Corp return (1120-S) DO be sure to deduct as business expenses everything that you can, relative to the business (internet costs, phone, office supplies, etc.) BUT the percentage will depend on the level of income

Lane :

I'f you'd like to give me the numbers I can estimate the tax for you ...

Lane :

Also, reme,ner that you are taxed on the PROFIT (after business expenses) NOT GROSS income

Lane :

sorry for the typo .."remember" ...

Lane :

Essentiall, you'll want to project PROFIT for the years, then set aside based on the following brackets

Customer:

ok thanks, XXXXX XXXXX anticipate earning 135k in commissions between now and the end of the year. while i can deduct office expenses i feel it it such an insignificant amount to make any difference

Lane :

K

Lane :

first of all do you file as single... married filing jointly?

Customer:

married jointly

Lane :

ok, juuuust as sec

Lane :

First, here's this: to give you a ell, but let me do a projection

Lane :

  • 10% on taxable income from $0 to $17,850, plus

  • 15% on taxable income over $17,850 to $72,500, plus

  • 25% on taxable income over $72,500 to $146,400, plus

  • 28% on taxable income over $146,400 to $223,050, plus

  • 33% on taxable income over $223,050 to $398,350, plus

  • 35% on taxable income over $398,350 to $450,000, plus

  • 39.6% on taxable income over $450,000.

Customer:

this assumes federal tax? i presume state and social security come into play as well

Lane :

OK here's a start

Lane :

yes

Lane :























































Gross income$120,000
Qualified plan contributions-$0
Adjusted gross income=$120,000
Standard/Itemized deductions-$12,200
Personal exemptions-$7,800
Taxable income=$100,000
Tax liability before credits$16,858
Child tax credits-$0
Estimated tax liability=$16,858

Lane :

self employment tax (ss & Medicare will be an additional 15.3% self-employment tax is composed of a Social Security tax of 12.4% on the first $113,700 of net self-employment income (for 2013), and a Medicare tax of 2.9% on all net self-employment income.

Lane :

NY state

Lane :

New York offers a standard deduction ranging from $3,000 for single individuals to $15,000 for married filing jointly. There is also an exemption deduction of $1,000 for each dependent. If your adjusted gross income is less than $100,000 you can take all of your federal itemized deductions on your New York return. Itemized deductions are limited for those with an AGI of greater than $100,000

Lane :

Tax Rate Range: Low – 4.0%; High - 8.82%. The state has enacted two new temporary income tax rates in its 2010 budget levied on the highest-income filers. For households with taxable income above $500,000, regardless of filing status, the tax rate rises to 8.97 percent from 6.85 percent; for those with taxable income below $500,000 but above $200,000 for single individuals, $250,000 for heads of households, and $300,000 for married couples filing joint returns, the rate increases to 7.85 percent from 6.85 percent. You are entitled to a household credit if you are single and have an adjusted gross income of $28,000 or less, or married with AGI of $32,000 or less.

Customer:

ouch that's a lot of interpretation also a lot of tax. are u able to put an approximation together

Lane :

Yep, sorry for the data dump ... I have model here just one more moment

Customer:

thanks

Lane :

Very quickly .. and dependent children?

Lane :

"any"

Customer:

no children, just me and my wife, she is w2'd

Lane :

OK using just YOUs, assuming 125000 net:

Lane :

g Income Tax Estimate


Federal & New York State Income Tax - Tax Year 2012



















Income Tax Calculations
New York

Federal
Gross Income$125,000.00$125,000.00
Deductions for AGI($0.00)($0.00)










Adjusted Gross Income (AGI)$125,000.00$125,000.00




















Deductions and Personal Exemptions
Standard Deduction (Married)($15,000.00)($11,900.00)
Personal Exemptions (Two dependants)($0.00)($7,600.00)










Taxable Income$110,000.00$105,500.00


























Federal Income TaxShow Calculations $18,435.00
New York Income TaxShow Calculations$6,733.50








































Tax BracketCalculationMarginal Tax
0.$0.00+$16,000.00 × 4%$640.00
1.$16,000.00+$7,000.00 × 4.5%$315.00
2.$23,000.00+$3,000.00 × 5.25%$157.50
3.$26,000.00+$14,000.00 × 5.9%$826.00
4.$40,000.00+$70,000.00 × 6.85%$4,795.00

Additional TaxesN/AN/A










Gross Tax$6,733.50$18,435.00











Tax Credits & PaymentsN/AN/A










Owed Tax$6,733.50$18,435.00

Lane :

Want to give me th wife's income anc withholding?

Customer:

thank u very helpful... yes, wife will show 65k in earnings, her withholding i believe is 2

Lane :

Can you get a dollar amount for the withholdings (maybe from a paycheck that can be annualized)?

Lane :

OR I can simply give you the gross tax amount and you can then know that anywithholdings will offset the tax bill

Customer:

sure, i will get you that information

Customer:

pls hold

Lane :

IN the mean time? here;s what it looks like from a GROSS income perspective (any withholding can just be subtracted from the tax bill)

Lane :

My Tax-Rates.org Income Tax Estimate


Federal & New York State Income Tax - Tax Year 2012



















Income Tax Calculations
New York

Federal
Gross Income$190,000.00$190,000.00
Deductions for AGI($0.00)($0.00)










Adjusted Gross Income (AGI)$190,000.00$190,000.00




















Deductions and Personal Exemptions
Standard Deduction (Married)($15,000.00)($11,900.00)
Personal Exemptions (Two dependants)($0.00)($7,600.00)










Taxable Income$175,000.00$170,500.00


























Federal Income TaxShow Calculations $35,519.00
New York Income TaxShow Calculations$11,186.00








































Tax BracketCalculationMarginal Tax
0.$0.00+$16,000.00 × 4%$640.00
1.$16,000.00+$7,000.00 × 4.5%$315.00
2.$23,000.00+$3,000.00 × 5.25%$157.50
3.$26,000.00+$14,000.00 × 5.9%$826.00
4.$40,000.00+$135,000.00 × 6.85%$9,247.50

Additional TaxesN/AN/A










Gross Tax$11,186.00$35,519.00











Tax Credits & PaymentsN/AN/A










Owed Tax$11,186.00$35,519.00

Lane :

Again, this if from a simply GROSS INCOME perspective... Whatever tax is withheld of paid-in as estimated, will reduce this tax bill

Lane :

"OR" paid in ;;

Customer:

her federal withholding per bi weekly paycheck is 233.92 oasdi 149.27 medicare 34.91 state 118.83

Lane :

OK this includes the state and federal withholding from you wife's paycheck:

Lane :

















Income Tax Calculations
New York

Federal
Gross Income$190,000.00$190,000.00
Deductions for AGI($0.00)($0.00)










Adjusted Gross Income (AGI)$190,000.00$190,000.00




















Deductions and Personal Exemptions
Standard Deduction (Married)($15,000.00)($11,900.00)
Personal Exemptions (Two dependants)($0.00)($7,600.00)










Taxable Income$175,000.00$170,500.00


























Federal Income TaxShow Calculations $35,519.00
New York Income TaxShow Calculations$11,186.00








































Tax BracketCalculationMarginal Tax
0.$0.00+$16,000.00 × 4%$640.00
1.$16,000.00+$7,000.00 × 4.5%$315.00
2.$23,000.00+$3,000.00 × 5.25%$157.50
3.$26,000.00+$14,000.00 × 5.9%$826.00
4.$40,000.00+$135,000.00 × 6.85%$9,247.50

Additional TaxesN/AN/A










Gross Tax$11,186.00$35,519.00




















Tax Credits & Payments
Federal Tax Withholding & Tax Payments($0.00)($6,081.00)
State Tax Withholding & Tax Payments($3,089.00)($0.00)










Owed Tax$8,097.00$29,438.00

Lane :

I don't hve a mode to sub tract the Self employment taxes but, again, that's an additional 15.3 % on YOU income ... and that shoudl doit

Lane :

a "model"

Lane :

"your" income

Customer:

ok, and of course, any deductions i can add to the mix, plus mortgage interest, taxes, etc, will further reduce this liability

Lane :

Exactly ... will reduce the gross income number AND that's at the marginal (top rate), as it comes ff the top

Lane :

Here's an excellent site for modeling the numbers

Customer:

ok thank u i appreciate your help i will positively rate your service now. one thing for certain... the more i work hard the more the irs and the state stick their hands in my pockets. makes me kinda sick

Lane :

you and me too :)

Lane :

Thanks!

Customer:

thanks again i will keep your info close by should i have further q's

Lane :

yes...

Lane :

see this:

Lane :

If you'd like to work with ME again just say "For Lane only," at the beginning of your next question



OR set me up as your preferred expert on your home page.



Thanks again,


Lane

Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 4161
Experience: Providing Financial, Tax & Business advice since 1986
Lane and other Finance Specialists are ready to help you
Expert:  Lane replied 1 year ago.

 

If you'd like to work with ME again just say "For Lane only," at the beginning of your next question

 

OR set me up as your preferred expert on your home page.

 

Thanks again,

Lane

Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 4161
Experience: Providing Financial, Tax & Business advice since 1986
Lane and other Finance Specialists are ready to help you
Customer: replied 1 year ago.

yes i will set up up on my home page terrific thanks again

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