[james lindstrom]

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.

[AtlantaTaxExpert]

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?

[james lindstrom]

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.

[AtlantaTaxExpert]

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.

[james lindstrom]

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.

[AtlantaTaxExpert]

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.