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VAer
Level 3

Do you need to pay estimated stock capital gain each quarter?

For example (just an example), if you are active stock trader and make around $10,000 each month, do you need to make some estimated tax payment each quarter? If not, when filing tax return for whole year, will government (federal government and state government) ask you to pay interest on the capital gain?

 

Unlike W2 salary(employer uses form W-4 to hold some tax), no capital gain is held. For small amount of capital gain, I think it is okay to report whole capital gain during tax filing season. But if you are a good active trader and make quite some money for most of time, brokerage company does not hold tax.

 

So the whole question is: for some large amount of capital gain, does government require stock trader to make estimated tax each quarter?

 

Thanks.

 

Edit: The answer is yes, the estimated payment is required.

 

So make estimated tax each quarter for both federal government and state government? Actually, I think estimated tax is only first THREE quarters, correct? For the fourth quarter, I can file tax return during tax season.

 

For example, if I make $50k for first quarter and make the estimated tax; I lost $20k for second quarter and no estimated tax is made; I make $20k for third quarter, do I still need to make estimated tax on third quarter (given that I lost $20k in second quarter)?

6 Replies
Critter
Level 15

Do you need to pay estimated stock capital gain each quarter?

 
Critter
Level 15

Do you need to pay estimated stock capital gain each quarter?

VolvoGirl
Level 15

Do you need to pay estimated stock capital gain each quarter?

Yes.  With those amounts you should be.  If you owe too much on your tax return  you will get hit with an underpayment Penalty.  And you certainly don't want to owe it all at once.

 

You must make quarterly 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. (Your prior year tax return must cover all 12 months).

 

Here are the blank Estimates and instructions…..

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

 

 

VAer
Level 3

Do you need to pay estimated stock capital gain each quarter?

So make estimated tax each quarter for both federal government and state government? Actually, I think estimated tax is only first THREE quarters, correct? For the fourth quarter, I can file tax return during tax season.

Critter
Level 15

Do you need to pay estimated stock capital gain each quarter?

 
Critter
Level 15

Do you need to pay estimated stock capital gain each quarter?

You can skip the 4th quarter payment ONLY if you file the return by 1/31 ... and since broker statements are not out until mid to late Feb you will not make that deadline usually.

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