Dear Karen: My income is substantially lower this year. Do I have to pay quarterly taxes?
Answer: Not if you estimate that your total 2009 tax bill will be less than $1,000, said Kevin Reeth, chief executive of bookkeeping service Outright.com.
If you do need to file quarterlies, make sure they add up to at least 90% of what you expect to owe for 2009. Even if you earn more than expected and underpay now, the penalties won't be catastrophic.
"People operate out of fear that they'll be penalized if they don't pay enough on their estimated taxes. Some of them ask about putting their payments on a credit card," Reeth said. "But the government penalty on underpaid estimated tax payments is down to 4%, the lowest rate we've seen in the last 10 years. Paying down credit cards, with rates climbing into the 20s, will likely save you more," he said.
How to donate when cash is tight
Dear Karen: My firm donates to local groups, but we will have to cut back this year. Any advice?
Answer: If cash is tight, donate products and services instead of writing a check, said Cheryl Fishbein, co-founder and managing director of New York-based Philanthropic Capital Advisors. "Time is just as valuable as a monetary gift, so consider volunteering," she said.
Rather than give small amounts to several charities, consolidate your gifts at one organization where they will make a bigger impact, she said. And don't be shy about taking credit. "Use the news of your donations to build your image and generate some positive PR or business for yourself. Attending charitable events can also be a great way to build your professional network," Fishbein said.
Scrutinize any nonprofit's financial records, overhead expenses and board members. "Your dollars will be spent more efficiently in an organization with a 9% to 14% overhead," she said. "Anything beyond that is inefficient."
Develop just one start-up at a time
Dear Karen: I want to start two businesses, one a production company for TV and film and another that requires a patent for the improvement of a food product. How do I proceed?
Answer: Concentrate on the easier and less expensive business idea and put the other on hold.
There are many examples of successful serial entrepreneurs, but being a "parallel entrepreneur" doesn't work well, said George J. Abe, faculty director of the applied management research program at UCLA's Anderson School of Management. He often encounters students who want to pursue multiple business plans.
"They have a lot of enthusiasm and energy, but you don't want them to drive off the rails. Focus is better, especially if you're trying to attract financing. Being helter-skelter does not create a good impression," Abe said.
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