When filling out Form 1040ES for a 2016 stock sales do I report the income from the sale or all income. Including my salary from which my company makes withholdings?

[hayong]

I made a stock sale this month (may 2016).  I think I need to pay the capital gains and to do this i need to fill out 1040 ES.  But I just wanted to know if this form was just for the stock sales or I had to include my salary wages which already have taxes withheld. 

Thanks Much

[TomYoung]

It's unclear what happened here, but I don't think you need to make an estimated tax payment using Form 1040ES.

It sounds to me like you sold some stock acquired through one of the various "employer stock incentive plans", like an Incentive Stock Option (ISO), a Non-Qualified Stock Option (NQSO), some Restricted Stock (RS) plan or an Employee Stock Purchase Plan (ESPP).  All employer stock incentive plans can and do create "compensation" that gets included on your Form W-2 and it's the "compensation" that creates the requirement for "withholding."  This compensation is the "spread" between what you paid for the stock - which can be $0 under some plans - and the worth of the stock when you got it.  Further, this compensation gets added to your "out of pocket" cost for the stock when you calculate your gain or loss on the sale of the stock.

So if this was a "same day" sale, (stock acquired and sold more or less simultaneously), then even though you might receive more cash from the sale than you paid for the stock, you really have no "capital gain" from a tax standpoint when you add back the compensation income to your out of pocket cost.

I don't know if this was a "same day" sale or not, but if it is, (or the sale occurred not too long after you got the stock), then you don't have any capital gain to worry about.  All you really have is "compensation" and that compensation has been taxed.

Of course you might have held this stock for many years and the stock might have appreciated greatly in value over that time, meaning that you do have a significant amount of capital gain, a large chunk of income from which there has been no withholding.  In that case you might have to make estimated tax payments, or maybe not.  If you do need to make estimated tax payments then you pay just enough to "make up" for the income from which taxes have not been withheld.

Tom Young

[hayong]

I apologize for the confusion.  Since I work for a company my paycheck has taxes withheld.  My stock sales is completely separate and unrelated to my work.  I just wanted to know if all I had to do was report the stock sales income I made and pay the estimate tax on that amount.  

Thanks Much

[TomYoung]

You don't "report" ANYTHING when you make estimated tax payments.  You simply send in a check along with a voucher - 1040ES - and that's it.

Work through the the "Form W-4 and estimated taxes" interview under the "Other Tax Situations" tab.  Enter your best guesses of income, deductions, exemptions, tax credits, withholding, etc. and see if estimated taxes are really NECESSARY in the first place.  It's OK to owe the IRS a large amount of money when you prepare your income tax return.  You just don't want to be "underpaid" and get hit with "underpayment" penalties.  This "one time" event might put you in the situation of owing a lot of money, but not being "underpaid" because you do have a job from and taxes are withheld from your "regular" income.