I had a really good season fixing lawn mowers this year. As a result, I will have a pretty hefty tax bill come April.

I am ashamed to say the I did not save enough to pay this tax. I went on vacation, bought a couple of used Benzes, etc. --basically had a good time.

I am pondering a couple of ways to deal with this.

1. Fund the my SEP (simplified employee pension for the business) to the max. The max for my plan is $11,500. If I do this, it lowers my net income and the resulting tax becomes manageable. I do not have $11,500 lying around. I am thinking of borrowing it from my local bank (personal loan) and putting up collateral (common stock) and the rate is only 5% simple interest. It will take me a year to pay it back and pay around $500 in interest. If I do this, I will not have to pay about $4000 in federal taxes.

2. Just pay the tax. As stated above, I will owe about $4000 in federal taxes. I will have to sell stock or find another way to pay it.

When I called the local banker yesterday, he acted like he has never seen this done before (borrow to fund a retirement plan or borrow to lower a tax bill). So am I crazy for wanting a small tax bill but going into hock for it for a year?

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Ben
1987 190d 2.5Turbo