w-4 withholding

[yanarthur]

It is hard to estimate the additional tax holding with stock gain/loss more than expected. Is it possible to pay more tax in January for the prior year so that I won't be penalized for paying too little tax? If so, what is the process? Thanks.

[JohnB5677 · Accepted solution]

You're right, trying to plan your taxes when you have capital gains is a challenge.

The easiest way for you to play it safe is if:

• You pay 100% of your 2023 taxes, (110% for higher incomes).
• If your previous year's adjusted gross income was more than $150,000 you will have to pay in 110% of your previous year's taxes to satisfy the "safe-harbor" requirement.

I don't know what you mean by "Is it possible to pay more tax in January for the prior year."?

• But yes, if you think there will be a shortfall in your tax payment 
  • You can make a larger single payment by April 15th 2024'
  • Or you can break it into 4 equal payments.
• You can have TurboTax prepare payment vouchers.  
  • It sounds like you tried to prepare your W-4
  • You can use the Capital Gains from 2023 for your estimate.
  • If you had a loss, I would not include it.
• Or you can setup an account and pay directly to the IRS Direct Pay With Bank Account

For additional information about IRS penalties please refer to: Underpayment of Estimated Tax by Individuals Penalty

[yanarthur]

Yes - I want to adjust my w-4 now, so I will use 110% of the tax paid for 2023 as the estimate. Thanks for providing the criterion for me.