Last tax year wife and I decided to divorce. We sold numerous equities and realized many capital gains that drove our 2019 joint return amount due very high and subsequently the 2020 estimated taxes very high.
The divorce was finalized in February 2020 so we will be filing single. Since divorce is considered a life event, am I still required to pay estimated taxes at all?
If so, how do I handle submitting estimated taxes for 2020?
Just for clarity, I'm making this statement: Since you were still legally married on Dec 31 of 2019, you two filed a 2019 joint tax return.
You are not required to pay estimated taxes. Period. End of Story. The 1040-ES forms are generated based on your 2019 income and tax liability. It's not uncommon for the program to generate those forms in your situation.
Just understand that if, when you file your 2020 tax return:
- If what you owe the IRS is more than $1000 or more than 10% of your total tax liability (whichever is *HIGHER*) then you will be assessed an underpayment or under withholding penalty. Overall though, I don't see that as a possibility since your 2019 AGI was raised by the selling of property you two own or owned together. So if you want, you can just throw away those 1040-ES forms and not concern yourselves with it.
However, I would highly suggest that both of you update your W-4 with your respective employers ASAP, to change the withholding amount on your W-2 income so they will withhold the correct amount based on your change in status from married to single.
Likewise for clarity, I do not have any W-2s. All income is investment based (gains and dividends).
I think you answered my underlying question with I am still liable for underpayment penalty if my quarterly estimated payments are too low.