IRS Penalty - Owe over $1K

[mthrasher16]

Hi All!

I just completed my taxes using Turbotax and it looks like my bill is a pinch over $2K.

As a result of my earnings through employment, I owe the IRS $250 - no big deal.  

But I also sold some LT stock last year, the capital gains from which I owe the IRS $1,800 - in and of itself, no big deal, I was expecting this.

But TurboTax is saying that I owe the IRS a penalty of $5, because my tax bill is over $1K.  

$5 isn't a problem, but what is going on here?  When was I suppose to have paid taxes on that stock sale?  It's the only transaction that is causing my bill to be so high.  

[RaifH]

The IRS imposes an underpayment penalty if you owe more than $1,000 at the end of the year unless you qualify for one of the exceptions. The most common exception is if you paid more than 

Your broker will not withhold taxes from capital gains. If you anticipate this happening in future years, you can either file a new W-4 with your employer asking them to withhold additional taxes or pay quarterly estimated taxes directly to the IRS.

Most people who do receive a W-2 find it easier just to have their employer do it. That way they don't have to remember every quarter and then you don't have to remember to report them at tax time. The IRS will not send you a tax document for estimated taxes that they have received throughout the year, whereas the additional taxes your employer withheld will be reported on your W-2. 

[mthrasher16]

Thank you, RaifH!  

[Mike9241]

assuming you made no estimated tax payments, if you owe over $1K then your withholding must be 100% (110% if taxable income for 2020 was over $150K) of your 2020 tax or 90% of your 2021 tax. see if there Is form 2210 - note that when the simplified penalty calculation is used there is no 2210