Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
2010 Estimated Taxes & Capital gains
Posted by: oldman, January 5, 2011 06:54PM
I had some capital gains in Dec 2010 and they were not figured into my estimated taxes so I have about $22,000 more in taxable income for 2010 than I have paid est taxes on. We are retired and have no earned income, only social security, IRA distributions and capital gains and some interest/dividends. We do not itemize.We are in 15% tax bracket. Must I add the additional estimated taxes to my payment for Jan 15, 2011?

Re: 2010 Estimated Taxes & Capital gains
Posted by: Sven, January 5, 2011 09:45PM
1. Is what you have already paid in in estimated tax in Q1-Q3 payments more than your total 2099 tax liability? If so, you should be in a safe harbor already, given what you have told us about the kinds of income streams you have.

2. As of this very moment you should be able, even if you do not have formal 1099's, etc., to do a dummy 2010 tax return. Have you already paid in estimated taxes more than 90% of your total expected 2010 tax liability? If so, you probably are in a safe harbor, again, based on what you have told us about your kinds of 2010 income.

You always have the option of paying, by 1/15/2011 whatever it takes to get you into a safe harbor. Do the math and do what needs to be done to avoide a penalty.

Re: 2010 Estimated Taxes & Capital gains
Posted by: oldman, January 6, 2011 02:14AM
The year 2009 was my first in retirement and was also the first year I did my own taxes and not having the experience to do it makes it difficult for me to understand it all, but in 2010 I paid $1668 total for 3 qtrs.I used H&R Block at home software. In the estimated tax it says my tax for 2010 is $4244. A 2009 refund of $1595 is applied to 2010 with a balance of $2224 for 2010. So I've paid $1668 of that already with $556 due Jan 15, 2011. I see it says my 2010 safe harbor tax payment is $3183.My taxable income was estimated as $63,850.
Perhaps I estimated high enough and no need to do anything except pay the 1/15/2011 payment. Hopefully state tax (ohio) will be ok as well.
Thanks for helping me think this through. Need to think a bit more.

Re: 2010 Estimated Taxes & Capital gains
Posted by: Sven, January 6, 2011 02:40AM
What was your total tax liability for 2009? The best safe harbor is to pay a dollar more in 2010 withholding and estimateds, if needed, than your tax liability was for last year. So please go ASAP and see what it says on Line 60 of your 1040 for 2009, assuming you used the long form. If you used any other form in 2009, read it to see what your total tax was.

If your the $1595 refund for 2009 that was kept by the IRS and
the $1,668 you paid for Q-1 through Q-3 is more than your 2009 tax liability, then you can stop and not make the 4th Q. payment.

If your total tax liability was more than $3,163, then we need to talk more about what another payment in January should be to let you avoid a penalty for underpayment of estimated tax.

Re: 2010 Estimated Taxes & Capital gains
Posted by: oldman, January 6, 2011 07:06PM
My 2009 Line 60 was $3,183. Wow, 2010 comes to $3263 with payments $1668 so far +overpayment of $1595, $80 more than 2009. So I can forget Jan payment? Should state tax also be OK? Good news so far Sven.

Re: 2010 Estimated Taxes & Capital gains
Posted by: edcosoft, January 6, 2011 07:45PM
If you are saying that your total payments towards your 2010 taxes was already more than your total tax for 2009, then you need not pay any more now. They'll catch you in April for the rest with no penalty.

If the above is not correct, pay as a 4 th installment on Jan 15 enough to make your total payments as much as your 2009 tax. YOu will have to file form 2210 and its Schedule AI to tell the IRS that all that extra income came in December but your tax program should be able to file it for you.

Ed, author of the 2012 IRS form 2210 AI calculator.

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