A WAG Approach to 1st Qtrly Tax Pymts

[Deleted]

I realized last night that DH and I should think about making a qtly tax payment for the FEDs and CA. And while I read Happy Scooter's thread I didn't want to Hijack it.

 I'm in a bit of a pickle. DH retired from his $150k+ job on 7/31/12 and has been on severance pay through 1/31/13. Our plan has been to live on our investment earnings (oil royalties, dividends and interest) before pulling any money from my 457, pension or savings. Because we've always had large carry forwards from our rental properties I didn't think we would pay very much in taxes, at least for the first five years. But I should do some kind calculation to make sure we're not going to get stuck paying a stupid penalty. Unfortunately I'm in San Diego dealing with a rather expensive eviction and don't have access to my 2011 tax records, the 2012 return isn't complete and the CPAs preparing those docs work for DH's employer not us so they won't prepare the qtrlies for us. And of course our old CPA is a little busy right now.

Anyone interested in helping me with a WAG?

Investment income for 1st Qtr

 $ 7,500 Oil Royalties
$ 3,500 Qualified Dividends
$3,200 Dividends

$14,000 investment income or $56,000 projected for the year. Last year we had about $80k but that was primarily due to $51k in oil royalties. Since then the price of oil has dropped significantly. We haven't made any significant changes in our investment portfolio so I'm expecting the income to be similar.

The 4 rental properties collectively have been basically cash flow neutral. The depreciation had put us into the carry forward mode. Let's assume for this exercise we'll have a $20k paper loss in addition to our little eviction problem.

It's just the two of us, ages 54 and 51. No mortgage on our principal residence but about $6k in property taxes

The eviction is going to cost us about $7,500 in attys fees, fix up (no cap improvements) mortgage interest and HOA (no rent for 2 months).

Any WAGs?

I'm leaning towards 10% on the $14k for Feds and 5% for CA.

[mwcpa]

if you have only 56K in interest and dividends and other income and you have "passive" loss carry overs and expect a current passive loss you are looking at being able to "free" up some of those losses...

The 20K in current losses should be allowed...

your AGI is 36K (I did not factor in any depletion/taxes on oil and gas wells)

You are looking at about 500 in total tax, assuming you take the standard deduction in 2013.

[Deleted]

Thanks MWCPA,
It sounds like I don't even need to make a quarterly tax payment if we're only going to owe $500, correct?

And just for clarification, when you say "free" up some of those losses, do you mean I can start using the $200k+ carry forwards which have already accrued? I was under the impression that I could only free up those accrued losses when we sold the property?

I may be mixing up things a bit in that I know we have about 16k in carry forwards remaining on the property we moved back into last summer. Because we're likely to sell it rather than put it back into rental service, it may be those carry forwards we can't use until we sell whereas if the other rental properties generate positive income we can off-set that income with passive losses.

Thanks,
Bonny