2 questions about Quarterly Estimate Filing

[PadillaFam]

1.

I get a W-2 for my job, but my husband is self-employed.  I get extra withholding taken out to try to offset for the taxes he should be paying. It is hard to estimate because sometimes business is better/slower than other times.  If business has been better for one quarter, can I also send in some money via Quarterly Estimate Filing? Can it just be whatever extra I feel like would be appropriate, or does it need to be more "calculated" via some process?

2.

Early this year, my husband inherited and sold a property in his birth country.  Do we need to account for this extra income in Quarterly Estimate Filing, or is it fine to wait til we file 2025 taxes?

Thank you!

[SwapnaM]

1) Yes, you can absolutely send in extra money via Quarterly Estimate Filing if your husband's business has been better in one quarter! The IRS understands that income from self-employment can fluctuate. You are not required to pay four equal installments. You can adjust your estimated payments throughout the year to reflect your actual income. If one quarter is significantly better, you can make a larger payment for that quarter to cover the increased income. It is generally recommended to calculate the amount more precisely to avoid underpayment penalties. 

Use Form 1040-ES: This form helps you figure out the estimated tax payments. It includes a worksheet to calculate the amount. Estimated Taxes: How to Determine What to Pay and When 

A Guide to Paying Quarterly Taxes 

2) Yes, you likely need to account for the profit from the sale of the inherited foreign property in your Quarterly Estimated Tax filings for the current year. When your husband sold the inherited property, any profit he made above his "basis" in the property is considered a capital gain and is taxable in the U.S. If you wait until you file your 2025 tax return (due April 15, 2026), you could face an underpayment penalty if you haven't paid enough tax throughout the year through withholding and/or estimated payments. The IRS expects you to pay tax as you earn income.

@PadillaFam Thanks for the question!!

[vithalanin]

Hello Padilla,

Let me answer your first question first:

You will want to calculate your estimated quarterly profit and then your estimated taxes based and pay based on that estimate.  You’re responsible for all of your FICA – Social Security and Medicare – along with income tax on your profit.  FICA is going to be 15.3% and your income tax will be based on your overall taxable income bracket.  
It is great that you are withholding more money from your Wages to cover the estimated taxes required for his income but it is crucial that you make correct estimated tax payments. 

Determining what to pay and when is crucial to avoid penalties and interest on underpayment of tax.  Here is a great resource on how to pay estimated taxes.

Now for your second question:

1) You should make an estimated tax payment based on the gain on sale of property. This is the same as having sold an inherited property in the USA. The difference here is that when you file your 2025 tax returns remember to take any Foreign tax credit for taxes paid on the sale of this inherited property in his birth country.

The thing to keep in mind about the foreign tax credit is that it is paid or accrued. Some countries do not have a calendar year for taxation reporting. So say the tax filing in the foreign country is not till after 4/15/26, and you do not pay the tax on this till the time of filing there, you can claim the taxes as accrued for 2025 tax year. To take the correct amount of tax, I would recommend filing an extension in the USA. After you file the tax return in his birth country, you would file the tax return in the USA.
One last thing on the inheritance, you will have to file Form3520 with the IRS, if the amount of inheritance exceeds $100,000.
Hope this helps!

Nisha

[PadillaFam]

Thanks!

So for Question 1, the extra money I would send in would not be anywhere near a quarter because I am already taking extra withholding to account for his earnings. But I would estimate how much extra I should pay, taking into account the withholding that I've already paid. Is that fine?

For Question 2, now I have questions about how much money I should send for the sell of the foreign property.  I do know anything about this; we have never sold a property in the US or abroad before!  I know we had the property appraised before selling. Is the taxable amount the different between the appraised value and the amount we earned on selling it? Also, we had to pay an incredible 20% sellers tax  to the foreign country. I don't believe the US will tax us for that, right? How should I take that into account when I estimate how much to send in for Quarterly Estimated Tax?

[vithalanin]

Yes. taking into account what you have already paid is fine for making the estimated tax payments.
For your second question, the value/basis of the property is usually the appraised value at the time of the inheritance. Gain is the difference between that appraised value and the price at which you sell the property. That being said, this amount maybe different in your case based on the tax treaty between USA and his birth country.

Nisha

[SwapnaM]

1) Yes, you are right!! Any "extra" withholding you're already taking out specifically to cover your husband's self-employment earnings directly reduces the amount you'd otherwise need to pay via estimated taxes.

2) If your husband paid taxes in his birth country on the sale, you can usually claim a Foreign Tax Credit on your U.S. tax return (Form 1116) to offset your U.S. tax liability on the same income. This helps avoid double taxation. Keep careful records of any foreign taxes paid. Add this estimated U.S. tax liability (after any foreign tax credit) to your overall estimated tax calculation for the year. You can then adjust your remaining quarterly payments (or make an additional payment for the quarter in which the sale occurred) to cover this new income.

@PadillaFam Thanks again!!

[PadillaFam]

Thank you. I have more questions on question 2:

So if the inherited property was worth less than $100,000 ( and it is), I do not have to file anything for the inheritance itself? 

We have already paid the tax to the foreign country.  We paid it at the same time as the sale. We do not need an extension.

Regarding making an estimated quarterly payment now that takes into account the foreign property sale, how can I decide how much to pay, given that 20% was already taken away from us in taxes when we made the sale. Please know that I know absolutely nothing about selling property whether here or in another country. So please give me the "for dummies"/newbie answer.

Thanks!

[vithalanin]

Just keep in mind that the Foreign tax credit would not be dollar for dollar match. So say you paid $2000.00 in his birth country, it would not necessarily lead to a $2000.00 tax credit in the USA due to tax law differences.

Nisha

[vithalanin]

You always have to report and pay taxes globally as a US Citizen or Green Card Holder even if the amount is less than $100,000.00. If the amount is more, then you have an added form to file, Form 3520.

You calculate tax on the full gain on sale, even though taxes were taken out at time of sale.

So for example, Appraised value at time of sale is say $100,000.00. Sold for $150,000.00. Tax taken out is $10,000.00. In the US return, you would owe taxes on the gain ($150,000 minus $100,000 = $50,000). The tax paid in the birth country is taken as Foreign Tax credit. 
Now you may have cost associated with selling the property, such as realtor/broker commission paid. This would reduce the gain on sale of property. So in the above example, it would reduce the gain from $50,000 by the amount of expense.

[PadillaFam]

Can you tell me how to estimate the foreign tax credit amount for Honduras?

[PadillaFam]

So, please confirm if this is correct: I should pay estimated taxes on :

-the appraised value of the inherited property (though less than $100,000)

plus

-(the sale value of the property) minus (the appraised value of the  property) minus (estimated foreign tax credit on the taxes we paid to the foreign country)

Can I subtract any lawyer fees needed to receive the inheritance or accomplish the sale?

I read that I need to file IRS Form 1116 to get the FTC. Is that something I get from a bank in that country? Or do I fill it out myself using the receipt as a reference?

[vithalanin]

Padilla,

There is one gain tax to be estimated and paid. This is on the gain from sale.
The Form 1116 is where you are claiming the Foreign Tax Credit. You do not get it from anyone. you need your Foreign Tax Return and a copy of the Foreign taxes paid to make the claim in the US tax return.
When filing with turbo Tax we can help you make these entries and claim the right amount of credits.
Also, keep receipts of the estimated taxes paid in the USA, as you will need them at the time of filing your tax return in the USA. You will need to make all these entries in the US tax return.
Hope this answers your questions.

Nisha