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Permalink Reply by Mom A1 on August 3, 2008 at 13:51

If I could invest, it would probably be in the people making the rigs. Or maybe (after 41% taxes) I would invest it in bonds of some sort. Chesapeake, Petrohawk, Cubik (?).

But let's not forget the "feed the pig" mentality. Pay off my debt and save some for when I really need it. There is another website that offers "feed the pig" advice.

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Permalink Reply by Snake Stewart on August 3, 2008 at 14:00

With prospect of royalties in the back of all our minds , I feel we shouldn't look too far ahead and forget that those royalties may not payoff after all. It sure didn't around here did it MOM ? We have to be super careful not to get crazy. Maybe even invest the taxes short term , CD maybe , before you have to pay them in April. We just have to make sure we are safe and prudent until we know for sure. There are no guarantees in this Biz !

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Permalink Reply by insomniacnla on August 3, 2008 at 14:09

Hey Snake,

You have the right idea about trying to make some use of the money owed for taxes and I had the same idea. The CPA told reminded me the taxes on the signing bonus will be due in the quarter of the year in which the bonus was received. I hate it but it is true. If you are going to receive a substantial bonus payment, the penalty for waiting until April to pay the federal taxes could amount to several thousand dollars. When I sign, I have to make an estimated tax payment right away in order to avoid a late penalty. I know, it sucks.

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Permalink Reply by Jack Spratt on August 3, 2008 at 14:50

A way to game the system, which I would get much pleasure from, would be to pay only an amount in taxes equal to 110% of your tax liability shown on last year's return. You would then be able to invest the difference, although you would still owe the full amount on April 15, 09.

If you didn't get your money until Jan 09, you'd have a year and 3 months to invest the difference (until Apr 15, 2010). (See IRS 1040 instructions for estimated tax penalty)

I'm not a tax professional, so this may not be the gospel.
JS

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Permalink Reply by waiting on August 26, 2008 at 9:12

You've got it right. Estimates for the current year are based on on the prior year / current year formulas.

A person who gets their (major) bonus money early in the year can make sure they put in the 110% of last years taxes and sit on the rest until the following april 15th and make some interest on it.

This will work great for someone who will be receiving a huge amount of money in one year compared to their smaller prior tax year.

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Permalink Reply by Snake Stewart on August 3, 2008 at 14:50

I would just as soon get it over with as well. I was just under the impression that the bonus was different then the quarterly royalty payment would be.I thought the bonus was treated as regular "rental" income and was due April.

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Permalink Reply by Cherrie Groves on August 26, 2008 at 8:30

The income from the bonus (rental) income and the royalty income are both reported on your regular tax forms due April 15th, without extension. In general, if you owe more than $1000.00 to either the federal or state with your taxes you will be assessed a penalty. It would be ideal if when you receive your payment to contact a tax professional to determine whether you need to file estimated taxes to either the IRS or LA to avoid those penalties.
Cherrie Groves, EA

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Permalink Reply by Kathy Morgan on August 26, 2008 at 12:27

A lot of great ideas posted. However, if you want to figure out and go ahead and pay the taxes, see my posts under the Taxes discussion. Set your "Discuss Haynesville Shale" tab above to categories. I have several posts on how to guesstimate your tax and how to avoid a penalty.

Kathy Morgan, IRS Enrolled Agent
H&R Block Bossier City Premium Office

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