"we just sold stock with LTCG, I want to pay the taxes on it now."
You're free to do that, of course, but it most likely isn't necessary, depending on your circumstances. Why make an interest free loan to the IRS if you don't really need to? It's perfectly OK to end up owing a lot of money to the IRS when you send in your income tax return in April, you just want to avoid being "underpaid" and owing 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%.)
So if you have a job and can make your withholdings paid in 2017 amount to 100%/110% of last year's tax liability you may choose not to pay estimated taxes. You might still write a big check to send in with your tax return, but you won't be assessed penalties.
"will I still need to annualize my income on my end of year taxes?"
If you end up paying estimated taxes instead of using taxes withheld to get into one of the "safe harbors" listed above then you might need to annualize your income if you still owe an underpayment penalty. The "first cut" of the calculation assumes your income comes in evenly throughout the year and the penalty is calculated on a quarter by quarter basis, so it's possible that the initial calculation would show that you "underpaid" for the first 3 quarters of the year. In that case annualizing your income - showing that your big capital gain was realized in the last quarter of the year - should entirely eliminate the penalty.
Tom Young
