Hello
I left my employer in January and decided to retire.
I sold the stock options from the former employer in June and got about $4M proceed. They are all qualified for the long-term investment.
I live in Hawaii. So, I assume I must pay 20% to Federal and 7.25% Hawaii as the long-term capital gain tax.
Questions:
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Hi Masa131!
Congratulations on your retirement!
I'll go through each of your questions.
Thanks for participating in TurboTax's Ask the Expert event today. I hope this information was helpful!
Sincerely,
Kimberly, CPA for over 30 years
Hi Masa131!
Congratulations on your retirement!
I'll go through each of your questions.
Thanks for participating in TurboTax's Ask the Expert event today. I hope this information was helpful!
Sincerely,
Kimberly, CPA for over 30 years
1. Yes, your understanding is correct.
2. You can use IRS worksheet or TurboTax tax calculator to estimated your estimated taxes. Remember to divide yearly estimated payment in two since only two quarters are left.
https://www.irs.gov/pub/irs-pdf/f1040es.pdf
https://turbotax.intuit.com/tax-tools/calculators/taxcaster/
3. If you have more gains later in the year, you have to recalculate your estimate payments for last quarter.
4. Here is a link to both to make estimated payments. There are several methods you can use.
5. Yes, if you miss a deadline, you can still pay estimated taxes but there might be under payment penalty.
6. Both IRS and state will charge under payment penalty based on certain factors. Here is a link for more info for Under payment penalty.
https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty
https://files.hawaii.gov/tax/forms/2022/n210ins.pdf
Hope this answers all your questions.
Hi Kimberly,
Thank you so much for your clear response.
I did not know about 3.8% Net Investment Income Tax. This is another kick in the head and stomach. I assume this is for Fed and basically I have to calculate the estimated tax based on 23.8% (20% + 3.8%), correct?
8% penalty for late payment. This rate is annual and you calculate the penalty dollar amount based on prorated amount, for example if you are 3 month late from the deadline, it will be 8% x 3 month / 12 months = 2%, correct?
Thank you so much for your response.
Hi Masa131,
The 3.8% Net Investment Income Tax applies only to investment income - generally interest, dividends and capital gains.
The IRS calculates interest based on days, not months, but in theory, your calculation is correct.
I'm glad this information was useful. Thanks again!
Kimberly, CPA
Thank you again, Kimberly. I got all information I was hoping to get.
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