Hello,
Can I use the method "100% (110%) of your actual 2020 federal taxes" to calculate my 2021 estimated tax even my income in 2021 will be much higher (because of large capital gain in stock market).
I used TurboTax to calculate the estimated tax and it showed me below numbers (I rounded these numbers):
*100% (110%) of your actual 2020 federal taxes ($150,000)
*100% of your estimated 2021 taxes ($300,000)
I would like to use the first method to pay estimated tax but also would like to avoid the penalty and interest from IRS.
Question 1 -- If I use the first method above, IRS will Not charge me for the penalty, correct?
Question 2 -- if I use the first method above, will IRS charge me for the interest for insufficient estimate tax ? If yes, what is the interest rate?
Your help is greatly appreciated.
If you use the 2020 100%/110% of actual taxes, you will not be assessed the penalty for underpayment of estimated taxes for the year.
There will be no penalty so there will be no interest. However, if you did not qualify for the penalty exclusion, you would not owe interest if you pay the penalty by the 2021 tax return due date.
If you use the 2020 100%/110% of actual taxes, you will not be assessed the penalty for underpayment of estimated taxes for the year.
There will be no penalty so there will be no interest. However, if you did not qualify for the penalty exclusion, you would not owe interest if you pay the penalty by the 2021 tax return due date.