1. Do IRS and states track the timing of stock sale? I did not make any profit in Q1 and Q2 so certainly did not pay estimated tax. If I have to pay estimated tax based on the calculation taking Q3 stock profit into consideration and I paid it in Q4 (after Oct 15 but before Jan 15, 21), will there be any penalty? If yes, would the penalty only accrue interest for 1 quarter (as there was no underpayment in Q1 and Q2).
They don't however if you owe more than $1000 at the end of the year then the IRS will compute the underpayment as happening ratably thru the year so to combat that norm you would have to compute a form 2210AI which is a pain.
2. Thank to this community now I understand IRS' rules determining estimated tax. Is it a simple method that I do not have to pay estimated tax if the other income (stock, interest) is less than 10% of my wage income with tax withheld? (Based on the rule that 2020 withholding > 90% of 2020 final tax). I know it won't be 100% accurate, but so long as the penalty is not material, I am ok.
What are estimated taxes?
https://ttlc.intuit.com/replies/3301588
Do I need to make estimated tax payments to the IRS?
PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2015 SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.
You must make quarterly estimated tax payments for the current tax year (or next 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. (Your prior year tax return must cover all 12 months.)
https://ttlc.intuit.com/replies/3301891
How do I make estimated tax payments?
https://ttlc.intuit.com/replies/3301258
Can TurboTax calculate next year's federal estimated taxes?
https://ttlc.intuit.com/replies/4242911
3. For state tax, as the NY (where I work) state tax is withheld only on wage, am I right that I need to pay estimated tax to NJ (where I live) if the stock gain incurs over $400 tax to NJ (no need to consider withholding by NY)? As I found NJ determines estimated payment only by underpayment, not withholding. False ... they follow the same rules as the feds .... https://www.tax.ny.gov/pit/estimated_tax/who_must_make.htm
4. I did not know why TurboTax asked me to make estimated payment to NY state. In 2019 my NY tax was quite accurate (only $40 underpayment). I checked the forms and found that TurboTax said that "110% of 2019 final tax" minus "2020 estimated final tax" is greater than $300. However, by the end of Sept, my NY tax withholding is still greater than my expected tax (based on wage income till Sept, standard deduction applied, no need to include stock gain). Can I just ignore the estimated payment? Doesn't TurboTax takes the % of withholding to final tax into consideration for NY state? Based off the info the program has it can calculate estimated payments ... they are suggestions not requirements ...
Can TurboTax calculate the estimated payments for next year's state taxes?
https://ttlc.intuit.com/replies/3301735
