is there a tax penalty for underpayment if I sell stock for huge capital gain december 09?
If I day trade in December and have to pay short term capital gain on 500k profit, would i have to pay a tax penalty for underpayment since I did not make estimated quarterly payment to IRS?
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August 30th, 2010 at 8:27 am
Of course not, silly goose. You did not earn the money until December, and “estimated” payments are just estimates.
I am very, very impressed you made such a gain without really understanding what you were doing, though! Well done, and Happy Thanksgiving!
August 30th, 2010 at 8:30 am
The quarterly payment for December 09 is due 1/15/2010.
Whether or not you do a payment, be sure to do a form 2210 with your tax return to limit the damage to the 1/15/2010 payment.
(Note, many people with low income in 2008 wouldn’t even owe much in estimated tax under one of the save harbor rules.)
August 30th, 2010 at 8:34 am
The last quarterly payment is due Jan 15 so you can still make it on time. If you file later than that and didn’t make the estimated payment, yes there would be a penalty unless you meet one of the penalty exceptions.
August 30th, 2010 at 8:56 am
if this could possibly be a very large amount, you can file the last voucher for 2009 on Jan. 15, 2010
and to avoid any penalty, that might be the way to go
August 30th, 2010 at 9:22 am
Not necessarily. If you wish, you may use the “annualized income method”, under which the first three estimated payments are calculated based on your income during only certain months (not December), and only the fourth payment, which is not due until January 15, is based on December income. Just make sure to make the fourth and final payment on time and in the correct amount.
August 30th, 2010 at 10:01 am
There is a penalty for making sufficient prepayments through withholding or writing a check. The IRS computer assumes you earned income in equal increments during the year unless you tell it otherwise. You will owe a large estimated tax payment on January 15, 2010. You will need to compute the proper amount of the penalty—zero could be the proper amount–on Form 2210 using the annualized method.