Q. Should I pay taxes on stock sales during the year?
A. Only if you want to.
An underpayment penalty will only be due, for the current tax year (2020), 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 (2019).
If your goal is just to avoid the underpayment penalty, then paying 100%* of the prior year tax liability is the “safe haven”
TurboTax (TT) can prepare the quarterly payment vouchers. In your 2019 software, enter at:
Federal Taxes or Personal (H&B version)
-Other Tax Situations
-Other Tax Forms
-Form W-4 and Estimated Taxes - Click the Start or Update button
On the next screen answer No to the W-4 question
*This rule is altered slightly for high-income taxpayers. If the adjusted gross income on your previous year’s return is over $150,000 (over $75,000 if you are married filing separately), you must pay the lower of 90% of the tax shown on the current year’s return or 110% of the tax shown on the return for the previous year. Your prior year tax return must cover all 12 months.
