Tax question For the 2022 tax return Due April 2023-
Is my interpretation of the situation correct? I believe that I don’t need to file any tax payment estimates and that I can pay the full tax liability when I file my tax return April 2023 And avoid any late payment penalties. For the 2023 tax return Due April 2024, I will start to do estimated tax payments if my trades are highly profitable, as I will need to to avoid a late payment penalty.
So my current plan is to just liquidate the amount of investments needed to pay the tax bill around April 2023.
Context:
We live in California
I’m going to have a tax liability of over well over $50,000 for this year Just based on my returns up until today. My stock investment returns this year have been around 50% and it’s all short term capital gains.
I’m married and my wife makes about $100,000 per year pretax ($6000 net each monthly paycheck) as a teacher but we definitely cannot withhold enough to pay for that amount of tax liability. And her first paycheck after the summer ends is October 1, 2022.
Correction: I qualify under the safe harbor rule based on my wife's withholding being enough to meet the prior year's tax liability. My understanding is that I can pay the entire tax liability April 2023 without any late payment penalties, is this correct?
You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:
. If the Adjusted Gross Income (AGI)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 state will also have estimated tax payment rules that may differ from the federal rules.
if you don't make an estimated tax payment now,
you're taking a big chance you may not have the necessary funds on Tax Day.