im really only trying to cover the taxes on my stock trades and dividend income and want the credit for the taxes withheld by my employer.
Your employer is withholding taxes based on what that employer paid you. Your employer could care less about your other sources of income. What your employer withholds is a percentage of each of your paychecks they pay you each payday. That percentage is based on how you filled out the W-4 you provided to that employer.
Now you can change your W-4 any time you wish with your employer. But why deal with it?
If your investments make $40,000 the first quarter, 20% of that is $8,000 and that's what you pay the IRS. Then if the next quarter your investments only make you $10,000 you'll send the IRS $2000 for that quarter.
If the third quarter your lose $15,000 on your investments, you send the IRS nothing. Not a penny. Then if in the fourth quarter you make $10,000 you would still send the IRS nothing. Simple math here.
1st quarter - $40,000 Taxes paid $8000
2nd quarter- $10000 Taxes paid $2000
3rd quarter - Lost $15,000 Taxes paid $0
4th quater - $10,000 Taxes paid $0
Year total $45,000 Taxes paid $10,000
For the year, 20% of your total would be $9000. But you've paid $10,000. What tax bracket you "actually" fall into will determine how much of it will be refunded.
Understand this: At tax filing time if you owe the IRS, so long as what you owe the IRS is less than $1000 ***OR*** less than 10% of your total tax liability (whichever is *HIGHER*) then no underpayment penalties are assessed. You'll be fine. Just don't bother with messing with the tax withholdings from your W-2 paycheck. It's a waste of your time and has the potential to leave you in a lurch if tables turn and you need the cash "RIGHT NOW".
