My wife and I bought our first house 18 years ago, and just sold it last month (and bought a new one, though I don't think that matters). We paid about 600,000 for it, put about 300,000 into it and sold it for 1,700,000 (yes, we live in California, how did you guess? ; )
So given the 500,000 exclusion and improvements, our cap gains were roughly 300,000. Obviously, that will blow us into an insane income bracket for the year (we currently make about 150,000 combined).
Anyway, I'm guessing the IRS (and Cali Franchise Tax Board) do not want to wait until next April to get their (I'm guessing roughly) 40k (and 20k) in capital gains tax. So do I just mail them each a check now for those amounts and then we'll settle up next year when we file our taxes? Do I just give them my name and SSN? Is there some special form I use? Is there a way to do this in TurboTax?
It's crazy, this must be a common thing but I've scoured the internet, this site and the IRS site and haven't been able to find the answer to these questions! There's tons of info and calculators and all kinds of stuff on calculating the taxes owed, but nowhere can I find when and how to pay them! I'd obviously prefer to wait until next April so I can invest the money in the meantime, but I'm guessing Uncle Sam would not be happy about that.
Thanks in advance for any assistance!
Go to this IRS payment website and use Direct Pay for a 2021 federal estimated tax payment - https://www.irs.gov/payments/direct-pay
To make a California estimated tax payment for 2021 go to the FTB website - https://www.ftb.ca.gov/pay/estimated-tax-payments.html
to avoid penalties for not paying in enough taxes on a timely basis when it comes to filing your 2021 return these are the rules.
must have paid in through timely estimates or withholding the lesser of:
90% of 2021 tax
110% of 2020 tax (100% if 2020 adjusted gross income was less than $150K)
meeting either test means that you could owe $ millions come 4/15/2022 (for 2021) and not be penalized for not paying enough in.