Hi and welcome to our site!Generally - you will need to pay income taxes before Apr 15 of followig year. So you just estimate your possible tax liability and be sure you have that amount available.The US income tax is a pay-as-you-go tax, which means that tax must be paid as you earn or receive your income during the year. You can either do this through withholding or by making estimated tax payments. If you do not pay your tax through withholding, or do not pay enough tax that way, you might also have to pay estimated taxes. If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.
I did read this part as you referenced. IRS also said that estimated payments need to be made quarterly. But in my case, my capital gain doesn't occur until the property is sold. So as soon as the property is sold, if there is no tax withholding, I can make an estimated payment to IRS to avoid the underpayment penalty next April, correct? Is there an IRS form to use?
The issue is that your gain from that sale is your additional income. If you pay at least 100% of the tax shown on the return for the prior year - there is no need to make estimated payments.
In this case - you will simply pay before Apr 15 of following year.
Yes I did 100% in the previous year. This makes sense, thanks for your clarification, appreciate it. I will give excellent rating. Thank you!
You may make estimate payments - but in this case - you are not required - you may pay any time as long as you pay before Apr 15.
Thanks very much!