2019 Capital Gains

[AJ-19]

I changed brokers in May 2019.  The new broker sold some older investments that were not part of their portfolio offerings.  This amounted to about $150,000 in long term Capital Gains.  I have not done anything on 2019 taxes so far.  Should I have included this in my 2nd Qtr Estimated Taxes?  If I pay it now, will there be a penalty?  Is there a special form I need to use to file these gains?

[TomYoung]

There's no clear answers to the questions you've asked because no one here has enough information to respond.

You might or might not have needed to increase your 2nd quarter (and 3rd and 4th quarter) estimated tax payments.   Understand that it's perfectly OK to owe the IRS a ton of money when you file your income tax return but what you want to do is to not be "underpaid", (a bit of income tax jargon with a specific legal meaning.)  If you end up being underpaid when you prepare your income tax return then that large check will have to include some amount for underpayment penalties.

Most taxpayers will avoid being underpaid if they:

1)owe less than $1,000 in tax after subtracting their taxes WITHHELD and available tax credits,

OR

2)if they paid at least the lesser of
     a)90% of the tax for the current year, or
     b)100% of the tax shown on the return for the prior year. (If last year's return shows AGI over $150K (for married filing jointly) then change that "100%" figure to "110%.)

Since you apparently were making estimated tax payments, (assumed from your remark "Should I have included this in my 2nd Qtr Estimated Taxes?") and presumably have made the 3rd quarter payment and are going to make the 4th quarter payment in January, if those payments amount to 100/110% of your 2018 tax liability, [the 2)b) "safe harbor" mentioned above], then you won't be underpaid and won't owe underpayment penalties when you send in your 2019 income tax return.  Only you can make the determination if your regular estimated tax payment will get you into one or the other of the above safe harbors.

If you determine that you indeed need to increase your estimated tax payments then doing it sooner rather than later will serve to mitigate any penalties.  The underpayment penalty is calculated on a quarter-by-quarter basis so you probably would owe some penalty for the 2nd and 3rd quarters.  If you have a job and can increase your tax withholding, that will give you even more benefit: taxes withheld are considered to be paid evenly throughout the year in calculating the penalty, so some late-in-the-year taxes withheld will reduce the "underpayment" in the 2nd and 3rd quarter.

You will report your gains using the "Stocks, Mutual Funds, Bonds, Other" interview (not available in all "online" versions).  The gains will be listed out on Form 8949 and the gain will flow up to to Schedule D to be included in your Form 1040 for 2019.  Long term capital gains are taxed at rates generally more favorable than "ordinary" income.

[Anonymous]

you can use TT taxcaster to estimate where you stand tax wise for 2019.

https://turbotax.intuit.com/tax-tools/calculators/taxcaster.  this is really 2018 but it should give you a reasonable estimate for 2019.   

an oversimplification but generally penalties can be avoided if there was timely payment of estimated taxes.  (unless specifically allocated withholding taxes will be allocated equally to each quarter).

estimated taxes are due 4/15, 6/15, 9/15 and 1/15 of following year.  the actual date will be later if the 15th falls on a saturday, sunday federal or certain state holidays.

if timely withholding and estimated payments, there will be no penalty if you have paid in 90% of current year tax or 100% (sometimes 110%) of last year's tax

also if your required estimated tax payments are less than $1,000  

[cgn]

I sold property on 9/11/2019 which will result in owing a sizable amount in capital gains... I estimate $63,000 (20%). I did not paid estimated taxes on Sept 15 to cover this extra amount of taxes for 2019.  If I wait to pay this when I file my taxes in April 2020, will I avoid any underpayment penalties if I have withheld 110% of 2018 taxes owed? Or should I send in a payment now to cover this amount?

Thanks!

[TomYoung]

@cgn 

IF you have withholding throughout the year 2019 that amounts to 110% of your 2018 tax liability*, THEN you will not incur underpayment penalties.

* Your prior year tax liability is not the amount you might have sent in with your income tax return.  Here's the IRS's instructions:

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Figuring your 2018 tax.

Use the following instructions to figure your 2018 tax.

The tax shown on your 2018 Form 1040 is the amount on Form 1040, line 15 reduced by:

1.Unreported social security and Medicare tax or RRTA tax from Schedule 4 (Form 1040), line 58;

2.Any tax included on Schedule 4 (Form 1040), line 59, on excess contributions to an IRA, Archer MSA, Coverdell education savings account, health savings account, ABLE account, or on excess accumulations in qualified retirement plans;

3.Any shared responsibility payment on Schedule 4 (Form 1040), line 61;

4.Amounts on Schedule 4 (Form 1040), line 62, as listed under Exception 2, earlier; and

5.Any refundable credit amounts on Form 1040, line 17a, b, or c, and Schedule 5 (Form 1040), line 70 and 73, and credit from Form 8885 included on line 74.

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