capital gains taxes need to be paid in quarter they occur?

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feh
Posts: 2011
Joined: Sat Dec 15, 2012 10:39 am

capital gains taxes need to be paid in quarter they occur?

Post by feh »

Will have large capital gains in Q2 this year. Do all the taxes need to be paid in Q2, or can I spread them out between Q2->Q4?

Thanks.
MrJedi
Posts: 3540
Joined: Wed May 06, 2020 11:42 am

Re: capital gains taxes need to be paid in quarter they occur?

Post by MrJedi »

Q2 to avoid potential underpayment penalty.

A workaround is to have extra tax withheld (like from a paycheck or IRA distribution) instead of paying an estimated tax. Tax withholding is always treated as timely regardless of which quarter it was withheld.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: capital gains taxes need to be paid in quarter they occur?

Post by dbr »

MrJedi wrote: Sat Apr 10, 2021 6:34 am Q2 to avoid potential underpayment penalty.

A workaround is to have extra tax withheld (like from a paycheck or IRA distribution) instead of paying an estimated tax. Tax withholding is always treated as timely regardless of which quarter it was withheld.
Right. I use my RMD at year end to even up total tax payment through withholding. A really large capital gain could be more than could be covered by the RMD so then you should pay in estimated tax for that quarter.
Chip
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Joined: Wed Feb 21, 2007 3:57 am

Re: capital gains taxes need to be paid in quarter they occur?

Post by Chip »

Let's also not forget about the potential safe harbors involving 2020 tax liability.
Topic Author
feh
Posts: 2011
Joined: Sat Dec 15, 2012 10:39 am

Re: capital gains taxes need to be paid in quarter they occur?

Post by feh »

Chip wrote: Sat Apr 10, 2021 7:47 am Let's also not forget about the potential safe harbors involving 2020 tax liability.
So, if I pay more than 110% of the 2020 taxes, the timing of the payments doesn't matter?
cas
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Joined: Wed Apr 26, 2017 8:41 am

Re: capital gains taxes need to be paid in quarter they occur?

Post by cas »

feh wrote: Sat Apr 10, 2021 8:07 am So, if I pay more than 110% of the 2020 taxes, the timing of the payments doesn't matter?
If you reach 110% of 2020 taxes via *withholding* (estimated tax payments NOT included), then timing doesn't matter. This is accomplished on page 1 of Form 2210.

If you want to reach 110% of 2020 taxes via withholding + estimated tax payments, then timing absolutely matters. Exactly how it matters depends on which of the underpayment penalty calculation methods you chose from your options on pages 2-4 of Form 2210.

For more discussion see: viewtopic.php?p=5853220#p5853220
increment
Posts: 1735
Joined: Tue May 15, 2018 2:20 pm

Re: capital gains taxes need to be paid in quarter they occur?

Post by increment »

cas wrote: Sat Apr 10, 2021 9:00 am If you want to reach 110% of 2020 taxes via withholding + estimated tax payments, then timing absolutely matters. Exactly how it matters depends on which of the underpayment penalty calculation methods you chose from your options on pages 2-4 of Form 2210.
If you choose "spread estimated payments over all four quarters," note that the first (April) one is due next week.
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