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underpayment penalty

I sold my house in June 2013 for gain and as a result I owe $18300 federal income taxes for

2013.  Last year my taxes were $8430 and since I paid $9000 I got federal refund last year.

Based on last year 2012, I paid $8640 federal Income taxes. Do I owe underpayment penalty this year because I paid $8640 estimated taxes, but I owe $18300 due to sale of my house.

The form 2210 says that if I paid enough taxes this year based on prior year income, I do not owe penalty this year.

Please clarify. Can I pay now the balance of the taxes I owe before 14th of January and avoid underpayment? 

  • Thanks for the answer. I bought the house in 1987 lived there for 6 years and rented out until 2010 and moved back in 2011 and sold it in June 2013. But I rented the house in 2009 and 2010 and lived in it 2011 2012 and until June 2013 and sold it. I  rented the house before 2008 and has depreciation of $40000 on which I have to pay taxes. So, when I used Turbo taxes my taxes came up to around 18000 dollars. and I paid only $8460. So, the sale of the house was in June 2013. Can I pay the remaining taxes before January 14th, and avoid penalty or since I paid enough taxes based on previous year income IRS won't impose penalty?  Thanks
  • If you paid enough taxes based on previous year then there will be no interest or penalty (assuming you pay balance due before April 15)
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Can I pay the remaining taxes before January 14th, and avoid penalty or since I paid enough taxes based on previous year income IRS won't impose penalty? 

It looks like you missed three installments if the house was sold in June.  In any event, a payment at this time will avoid the penalty for the fourth quarter, but not the second and third.


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    Are you sure you had a taxable gain?  For the sale of a residence, up to $250,000 ($500,000 on a joint return where you both lived in the residence) of gain can be excluded from income if you lived in and owned the house for two of the last five years.

    (You may have a smaller exclusion if the property was used as a rental during the five year period, and you may have income from recapture of depreciation if you claimed an office in the home deduction for the home.)

    If you work through the interview on sale of a residence, Turbotax will compute the exclusion. Look under the wages and income tab for less common income, then sale of home.

    I would only report the sale if:

        The gain exceeds the amounts that are exempt from tax, or
        You received a Form 1099-S from the closing agent.

    A closing agent can get an affidavit or statement from you that the sale meets the requirements for exclusion and, if so, not send a Form 1099-S reporting the sale.  If the gain is fully excludible and you don't get a Form 1099-S, there is no reason to report the sale on your tax return.


    • Thanks for the answer. I bought the house in 1987 lived there for 6 years and rented out until 2010 and moved back in 2011 and sold it in June 2013. But I rented the house in 2009 and 2010 and lived in it 2011 2012 and until June 2013 and sold it. I  rented the house before 2008 and has depreciation of $40000 on which I have to pay taxes. So, when I used Turbo taxes my taxes came up to around 18000 dollars. and I paid only $8460. So, the sale of the house was in June 2013. Can I pay the remaining taxes before January 14th, and avoid penalty or since I paid enough taxes based on previous year income IRS won't impose penalty?  Thanks
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