Stock Sale & Estimated Tax Penalty

[jsyver]

Hello.  I sold stock from my brokerage account in 2019.  The brokerage firm did not withhold taxes.  Am I at risk of any penalties for not finding a way to pay the estimated tax on this sale during 2019?  If so, is there anything I can do now (before all tax forms are distributed in 2020 for 2019 tax filing) to address this situation?  Please advise.

[Anonymous_]

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@jsyver wrote:

Am I at risk of any penalties for not finding a way to pay the estimated tax on this sale during 2019?

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Generally, most taxpayers will avoid the underpayment penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

See https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

[Anonymous · Accepted solution]

there is no penalty if you meet one of these tests

1) if your withholding (WH)  (and any TIMELY estimated  tax payments (ETP)) are 90% of your 2019 tax liability

2) if WH + ETP = 100% of your 2018 tax (110%, if 2018 adjusted gross income over $150,000)

3) tax due after subtracting  WH only is less than $1,000

4) was a US citizen or resident and had no tax liability for 2018 on a return that covered the full year. 

depending on when you realized your capital gains, you may me apple to reduce any penalty by using the annualized installment method. this method doesn't help if most of your income (stock sales and all other income) was realized early in the year.    

 estimated taxes can be paid directly using the IRS website.  estimates were due, if required, 4/15, 6/15, 9/15 and the next is due 1/15/20 but can be paid now. 

it also depends on whether the gains were long term or short term.  Long term gains and qualified dividends are taxed at a lower rate. 

you can use Turbotax's taxcaster to estimate where you stand 

the online versions of TT don't let you see the forms until you pay and you have to avoid clicking the file button. -  print to pdf and then review it  or buy a desktop version where you can do as many scenarios as you like and not have to pay for each one to see reults.    

https://turbotax.intuit.com/tax-tools/calculators/taxcaster

if a broker has your social security number they are not required to withhold. 

if they don't 20% withholding but then you have an issue claiming withholding becuase there is no SSN on 1099 

[jsyver]

Thank you.  I have read through the publications prior to submitting the question.  I do appreciate the assistance and quick responses!  I am not a business owner.  In filing of my 2018 taxes, I had no estimated quarterly pre-payments due during 2019.  When I sold stock in 2019, I set aside some funds to address taxes; however, as like most loyal citizens....I'd prefer to keep my money until the last possible moment (eg:  I'd rather have interest in my account rather than the government having interest on it).  Regardless, the estimated tax question is confusing and I've heard (but not found) specifics on a penalty if you don't pay estimated.  So, if I play the tax estimation game, and I believe I owe more than $1K plus the already paid withholding from my employer, is the penalty applied?  Should I write a check for what I think I owe before Jan 15, 2020 and then sort it out when all the tax forms are received when I file?