"Would I pay 15% of my estimated capital gains by Jan. 16 to avoid a
penalty or can I just make sure I've paid 100% of my 2016 taxes by that
same date?"
Well, it's more complicated than that, naturally. If you know exactly the amount you need to pay in estimated taxes to get your total taxes paid by 1/16/18 to match your "last year's tax" number (line 63 for most people), then I'd go with that. No point in making an interest free loan the the IRS.
Even if you get into the 100% of last year's tax safe harbor, you might still owe an amount of underpayment penalty. The underpayment penalty is calculated on a Quarter-by-Quarter basis so the "1st cut" of the underpayment penalty will put 1/4th of that capital gain in each quarter, even if the capital gain came late in the year, perhaps incurring penalties for those "underpaid" quarters. (Your withholding gets credited to quarters evenly, to, even if you make a big "catch up" withholding payment later in the year. But estimated taxes are credited to the quarter in which they appear.)
If your 1st cut indicates a penalty then you should work through the "Underpayment penalty" interview, "annualizing" your income, which essentially means you tell the IRS when those capital gains were received. If the bulk of them occurred in the 4th quarter, that will pull the gain out of the "default" of being evenly spread through the quarters, potentially minimizing or eliminating any penalty.
Tom Young
