Can I still owe interest on taxes if I don't pay enough estimated taxes?

[mellynlee]

I made estimated tax payments last year by calculating 110% of the tax owed. I then made sure to make quarterly payments by following the formula/advice given to me last year:

https://ttlc.intuit.com/community/taxes/discussion/re-how-to-calculate-estimated-tax-payments/01/304...

By doing so, I did not owe any underpayment penalties this year and we DID sell stock so we owed additional capital gains taxes. It doesn't look like I have to pay any interest (penalties) on our additional tax owed either. However, I saw somewhere that I could incur interest if I do NOT estimate in the taxes owed for capital gains throughout the year. Is this true??

If so, what do I need to do to calculate my estimated taxes for this year?

And, if not, can I follow the same formula that I did last year, to pay my estimated taxes? The quarterly taxes I paid were NOT equal amounts. I noticed that TurboTax has given me an estimate in taxes as well - and they are all equal amounts that seem to be a lot higher than what my formula estimates. Do the quarterly tax payments need to be equal amounts?

What is the correct way to make the estimated tax payments, and will I incur any interest penalties if I do not account for additional capital gains throughout the year?

[KrisD15]

If you do not incur an underpayment penalty, you will not incur interest. 

IRS Link

[fanfare]

In order to avoid all penalties, you should pay each period 25% of no less than 110% of prior year's tax.

in other words, substantially equal payments.

round payment up to next $10 or next $100.

you are protected from a sudden  (or predicted) capital gain at year end.
you know your prior year's tax when you file by April 15, which is also the first estimated tax payment due date.

@mellynlee 

[mellynlee]

So, are you saying that the calculations that I used to estimate my taxes is NOT correct? (See TurboTax post listed in my original post). 

The estimated tax payments are due 4/15, 6/15, 9/15, then 1/15/25. These are not equal 3 month intervals, so the taxes taken out of our paycheck are already differing. The formula they suggested to use takes that into account, and makes sure that 25% of the total tax due is paid at each installment (but my check amount might be more or less, depending on what was taken out of my paycheck).

Is that correct?

Do you know how TurboTax calculates the estimated tax payment without knowing what is withheld from our paycheck each pay period?

And  if I pay at least 110% of this year's tax, then I will not have to worry about penalties or interest on any additional capital gains, correct?

[fanfare]

my formula is for the default calculation and assumes no withholding.

If you have withholding, the combined amount of witholding plus estimated tax should be 25%

You  may also use Form 2210 Schedule AI but that's at filing time, after the fact, and much more complicated, so so it is hard to calculate quarter by quarter in advance,

Confusion is what happens when you break up your question into two or more threads.

@mellynlee 

[mellynlee]

Thank you for your reply, and sorry for the confusion.

So...Can I assume that if I use the same calculations I was given last year (and pay 110% of last year's taxes), I will not have to worry about any penalties or interest from capital gains? (Sounds like there is no interest accrued if there is no penalty, anyway.)

Thank you.