I just signed a lease with a gas drilling company and will be receiving the bonus money in January. I realize the money is ordinary income, but do I have to pay the taxes immediately, or do I wait until April to file? It makes a big difference since I could lock the tax amount up in a CD and at least earn a little interest on it before forking it over to the feds.

If you get money in January 2009, it is NOT taxable for 2008 (you file the 2008 tax return by 15 April 2009).

Now, if it is a substantial sum of money, an estimated tax payment IS due by 15 April 2009. Failing to make that payment could cause you to incur an under-payment penalty when you file in 2010.

How much are we talking about?

If you get money in January 2009, it is NOT taxable for 2008 (you file the 2008 tax return by 15 April 2009).

Now, if it is a substantial sum of money, an estimated tax payment IS due by 15 April 2009. Failing to make that payment could cause you to incur an under-payment penalty when you file in 2010.

How much are we talking about??

So I would have to make an estimated payment. We're talking in excess of $100,000 dollars. So then I record this amount on my next 1040. The amount paid functions effectively like withholding?

But this is confusing. Suppose I were to receive the money after April 15. How much time wold I have to make the estimated payment? I certainly couldn't make it by April 15.

The estimated tax return is filed using Form 1040-ES, which has a worksheet that calculates how to make the payment. Yes, the estimated payment effectively replaces the withholding.

BTW, have you considered asking the gas company to do a wothholding? That would be a LOT simpler.

The 15 April 2009 filing deadline is only for the FIRST quarter of 2009.

Second quarter (April-May) is 15 June 2009.

Third quarter (June through August) is 15 September 2009.

Fourth quarter (September through December) is 15 January 2010.

The estimated tax return is filed using Form 1040-ES, which has a worksheet that calculates how to make the payment. Yes, the estimated payment effectively replaces the withholding.

BTW, have you considered asking the gas company to do a wothholding? That would be a LOT simpler.

The 15 April 2009 filing deadline is only for the FIRST quarter of 2009.

Second quarter (April-May) is 15 June 2009.

Third quarter (June thru August) is 15 September 2009.

Fourth quarter (September thru December) is 15 January 2010.

Thank you. I think I get it. I completed a W4 at the time of signing, but that's all. Looks like I download a 1040 ES and fork over the dough then look for as many deductions as possible. Besides loading money into an IRA are there any other possible deductions I might consider?

Thanks again.

Charitable contributions (cash and non-cash), pre-paying real estate taxes and a second home mortgage (if you can qualify in the tight credit market) are the most common deductions.