Q. Are estimated tax payments required on investment withdraws to avoid a penalty for underpayment?
A. No.
You should 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 credits.
- 2. You expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your current year’s tax return, or 100% of the tax shown on your prior year’s tax return. (110% if your AGI was more than $150K) . Your prior year tax return must cover all 12 months.
If you don't meet the $1000, the 90% or 100% rule at tax filing time, you can be assessed an underpayment penalty.
