I am deciding if I need to pay estimated taxes on 4/15 for Q1 since I have sold a large sum of investment resulted in capital gain.
Generally, you must make estimated tax payments for the current tax year if both of the following apply:
1. You expect to owe at least $1,000 in tax for the current tax year after subtracting your withholding and refundable credits, and
2. You expect your withholding and refundable credits to be less than the smaller of:
a. 90% of the tax to be shown on your current year's tax return, or
b. 100% of the tax shown on your prior year’s tax return. (Your prior year’s tax return must cover all 12 months.)
The second point is a bit confusing. First of all, what does "withholding and refundable credits" mean? does it mean total withholding subtract refundable credits/refund? I am employed and I expect to make much more from my job this year, so I expect the withholding will be much more for this year. I am not sure what 90% of the tax on my current tax year tax return would look like (probably more than 100% of prior year tax). But regardless, as long as my withholding from this year is more than the total tax shown in prior year return then I should not need to pay any estimated taxes is that right?
Basically the second point can be read as - "as long as your withholding is greater than at least one of the following.....90% tax own from current year or 100% total tax from prior year"?
