This isn't how the tax regulations are written. If you have non W-2 income it is automatically presumed by the estimated tax regulations to have been equally earned over the course of the year and hence you're required to pay equal withholding over the 4 quarters. That is the default requirement. You can specifically request a waiver from this if you have a demonstrable event that caused you to earn the money later in the year, and in this case the IRS will specifically look at the circumstance around your income and decide if they can allow you to go against the default and only pay estimated tax later in the year. But remember given the regulations presumption, it is you who must demonstrate when your income occurred and specifically ask the IRS to examine it, and if you can't demonstrate that it occurred later in the year, the default is that it occurred equally over the course of the year. So no digging is required by the IRS, it defaults to equal estimated tax payments and they only dig when you specifically ask them to in order to receive something other than the default. No value judgment on that, it's just the reality.
You say pay estimated tax on ANY income? I have a full-time corporate job. And I'm trading on the side. And my trading has been doing really well. I'm being to think about taxes. But trading gains are considered CAPITAL GAINS and NOT income right? So I should NOT have to worry about estimated taxes? I don't have any entity formation. Just plain taxable account I'm trading.
You only should be worried if you don't want to pay any interest penalty on underpaying your taxes throughout the year. If you don't mind that, then there is nothing to worry about. Any income applies to estimated taxes.
Quarterly estimated tax payments only apply to those that are self employed. Those that have taxes deducted from their paycheck and get a W-2 in January do not file quarterly. https://www.fool.com/taxes/2017/03/16/who-should-pay-quarterly-estimated-taxes.aspx
Any income, there is no differentiation between how you earned your money when it comes to estimated taxes. You have to pay 90% of your eventual tax bill or 100% of your last years tax bill under the safe harbor or you'll get hit with interest payments, full stop.
Hmm... I hadn't realize that capital gains from trading falls under this. This year my trading so far on a monthly basis(ony 1 month so far) is exceeding my monthly salary! I know this is a good problem to have! haha. And February is shaping up to be a strong month too. Maybe I should consult a tax accountant..
Hmm... I hadn't realize that capital gains from trading falls under this. This year my trading so far on a monthly basis(ony 1 month so far) is exceeding my monthly salary! I know this is a good problem to have! haha. And February is shaping up to be a strong month too. Maybe I should consult a tax accountant..
I'm not self employed. I have a normal full time corporate job. So will my capital gains from trading ont he side count as income?
The easiest thing to do is just pay enough estimated so that your withholdings and your estimated payment exceed what you paid last year, then you're safe. You do probably want to calculate what your tax payment will be before you start trading in 2020 so you ensure you put enough aside to cover that since you wouldn't be able to claim those losses until 2021. But otherwise try to avoid paying estimated taxes especially this early because you might not end the year this far ahead and if so you just gave Uncle Sugar an interest free loan.
Only those are self employed are required to file quarterly estimates, but even if you don't it's no big deal - you simply would have to pay a fine which is interest based on the Fed fund rate. From Turbo tax: Anyone who is self-employed may be required to pay quarterly taxes. A self-employed person is someone who: Is an independent contractor Works in a trade or field as a sole proprietor Is a member of a partnership that conducts business, such as an LLC Runs a business on their own, including a part-time business https://turbotax.intuit.com/tax-tip...s/a-guide-to-paying-quarterly-taxes/L6p8C53xQ ** I am not a tax expert - this is my opinion, you should verify this with the IRS or a qualified tax professional **