You can get an underpayment penalty if you owe a lot of taxes, but didn't pay them until the end of the year. The IRS rule is that tax should be paid as the income is earned. So, if you made a lot of money in the first part of 2019, but didn't pay any taxes to the IRS until the last part of 2019, you can have a refund but still owe an underpayment penalty.
Note that the IRS has several "tests" that can help avoid an underpayment penalty, based on what you paid for 2018 taxes, and what and when you paid for 2019 taxes. For example, if most of your income was in the last part of 2019, you may be able to calculate your penalty using the "annualized" method and avoid or reduce the penalty.
So, it is very important to answer all the questions in the underpayment penalty section of TurboTax. To find the underpayment penalty section, click the "magnifying glass Search" icon on the top row, enter "underpayment penalty" in the search window and press return or enter, and then click on the "Jump to underpayment penalty" link to get the section where you can answer all the underpayment penalty questions.
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Here is my question about this whole mess. Let’s say I use a “cloud mining” service website to mine bitcoins. Where I physically am not mining anything on my end. Do I still have to report the income the day the coins are created(which is daily), or, since they are not yet in MY personal crypto wallet and not in my complete control UNTIL I withdraw them from my balance on their website, can I just report the value on the day I withdraw them to my personal wallet where I have control over and will sell them for USD IMMEDIATELY, (for no hassle of capital gain calculations)? I mean, I think it is silly to report cloud mining earnings each day especially since they are not yet in my control and the website can be a total scam and take my cash and coins and run/shut down / etc. which there is NOTHING stopping them from doing that. Also, they give the option of CONVERTING your mined coins for more “hashpower”, instead of withdrawing them. I guess what I am wondering and I am sure a lot of people are ...can I do this...??? Pay them a fee for hashpower to mine coins, then each month like clockwork, convert 75% of the coins to more hashpower (reinvestment) , and then withdraw the other 25% to my wallet on Coinbase to sell immediately for USD. In turn only reporting that USD each month as profit/income? With a cost basis of zero? What form would I need to report this, if this is an ok way for Uncle Sam ?
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VERY IMPORTANT... if you got a 1099-S from the closing company you MUST report the sale even if you have no gain to report... make sure you check the 1099-S box and look sharp since it is not obvious ... the sale must show on the form 8949 & Sch D.
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