Seeking guidance - I’m going to owe a huge amount of taxes April 2023 Due to massive short term capital gains

[bigredcat321]

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?

[Bsch4477]

You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:

• Your filed tax return shows you owe less than $1,000 or
• You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.

. 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.

[fanfare]

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.

@bigredcat321