Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Level 1
posted Aug 29, 2020 3:50:31 PM

I am making money as a day trader, so I will have short term capital gains, do I need to make estimated taxes on a quarterly basis?

1 2 528
1 Best answer
Level 15
Aug 31, 2020 6:44:03 AM

The key is to avoid a penalty for underpayment of estimated tax.

 

You can avoid that penalty if:

 

1) You owe less than $1,000 in tax, after subtracting any withholding and refundable credits, OR

 

2) You paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on your return for the prior year, whichever is smaller. 

 

See https://www.irs.gov/taxtopics/tc306

2 Replies
Level 15
Aug 31, 2020 6:44:03 AM

The key is to avoid a penalty for underpayment of estimated tax.

 

You can avoid that penalty if:

 

1) You owe less than $1,000 in tax, after subtracting any withholding and refundable credits, OR

 

2) You paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on your return for the prior year, whichever is smaller. 

 

See https://www.irs.gov/taxtopics/tc306

Level 15
Aug 31, 2020 8:46:16 AM

If you don't pay the estimates and your withholding isn't any of the following you will be hit with underpayment penalties.

 

1) 2020 balance due after withholding is less than $1000

2) withholding covers 90% of 2020 tax

3) withholding is 100% (110% if 2019 adjusted gross income is over $150,000) of 2019 tax

 

 

 

See this for calculating 2020 estimated taxes - https://ttlc.intuit.com/community/tax-payments/help/can-turbotax-calculate-next-year-s-federal-estim...

 

See this for paying estimated taxes - https://ttlc.intuit.com/community/tax-payments/help/how-do-i-make-estimated-tax-payments/00/25875