Question about stock capital gain tax

[wqzqr2000]

Hi,
I have two questions about stock capital gain tax.
1.Can I pay capital gain tax as soon as I sell the stocks (for example I sell stock in October 2021) and how (can I use amended tax return)? Because it is very hard to estimate how much gain or loss I will get and I don't want to pay penalty and interest in next year.
2.If I exercise a stock option and hold that stock (I bought stock option from market, not employer incentive stock option), do I need to pay capital gain tax?

Thanks

James

[RayW7 · Accepted solution]

In answer to question 1, you should wait until you file your return to claim the gain or loss. 

Capital Gains and Loss are accumulated for the year and then a summary is totaled when you file your return. (Schedule D)  Loss will offset gains.  In addition, with the current tax code, the taxable amount of the gain is based on your income.

In 2020 the capital gains tax rates are either 0%, 15% or 20% for most assets held for more than a year. Capital gains tax rates on most assets held for less than a year correspond to ordinary income tax brackets (10%, 12%, 22%, 24%, 32%, 35% or 37%).

Question 2,  no taxable event occurs until you sell the stock. 

-follow this link for additional information-

Capital Gains and Losses - TurboTax Tax Tips & Videos

[wqzqr2000]

      Thank you for your quick reply. About the answer for question 1, I am still not clear. I want to report 2020 tax return before deadline 05/17/2021, however, if I get capital gains after that date in 2021 (and don't pay estimated tax) , do I need to pay penalty and interest next year (I have regular salary every year)?

      What should I do to avoid penalty and interest ?

      Thanks,

     James

[VolvoGirl · Accepted solution]

When you get the gains or dividends or sell you can send in an extra estimated payment then.  

Here are the blank Estimates and instructions…..

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

The 1040ES quarterly estimates are due April 15,  June 15, Sept 15 and Jan 18, 2022.  Your state will also have their own estimate forms.

Or you can pay directly on the IRS website https://www.irs.gov/payments

Be sure to pick the right kind of payment and year.....2021 Estimate

[wqzqr2000]

Thank you very much for your answers, they are very helpful.

One more question, does TurboTax provide function to file quarterly estimated tax?

Regards,

James

[VolvoGirl · Accepted solution]

Turbo Tax can help you prepare the estimates but not actually file them for you.

To prepare estimates for next year you start with your current return, but be careful not to change anything.  If you can't get back into your return, Click on Add a State to let you back into your retun.

You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

Or Go to….

Federal Taxes or Personal (Deskop H&B)

Other Tax Situations

Other Tax Forms

Form W-4 and Estimated Taxes - Click the Start or Update button

See,

https://ttlc.intuit.com/community/tax-payments/help/can-turbotax-calculate-next-year-s-federal-estim...