Help with estimate taxes on large lump sum (pay, rate, dollars)

[TheLonelyGoatherd]

I just spoke to the IRS and they said that there are no live agents to help me this time of year. They won't be there until January

We always pays our estimated taxes on my husband's small business. We just pay about 90% of the taxes that we paid the year before.

My husband has been working also with a small start up company and he owns 2% of it. The company will likely be sold. If it does sell we would have a much larger chunk of money coming around Sept/Oct.

What I'm wondering is how does this work with estimated taxes? My husband thinks you have to turn around and pay taxes on the money right away with your estimated taxes that are due in January.
But I would think that because this is money made in 2019, the taxes wouldn't be due until April 2020.

So for example in the past we were paying taxes on 150k yearly income
Now this year our income is 150k with another 500k in capital gains taxes. We will receive this money in September.
Do we have to pay the capital gains taxes by January along with the rest of the estimated taxes? Or would they be due in April?
I'd love to keep the money in the bank earning interest as long as we can that's why I'm asking.
On the other hand, I do NOT want to pay a penalty on the capital gains taxes for paying them late if we paid them in April and they were actually due in January.

Thank you!

[MrRational]

Originally Posted by TheLonelyGoatherd

...our income is 150k with another (one time event) 500k (subject to) capital gains taxes.
We will receive this money in September.
...that because this is money made in 2019, the taxes wouldn't be due until April 2020.

Correct. However the question here is about withholding (estimates) made & paid in advance of the tax due date.
On the quarterly basis with the next payment due (10/15/19)

If you want/need a more specific response call your CPA.

[rjm1cc]

Take a look at this https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes


I did not read through it but as I recall if you pay estimated taxes for 2019 that are 110% of your 2018 actual tax due you will be ok. You want to look for the safe harbor options.


Your money earned in 2019 so tax due next April is not correct but the safe harbor rules will let you do this for a lot of the tax that will be due so in dollars you are probably more correct than not.

[TheLonelyGoatherd]

Thank you both! Our CPA is on vacation and we were really curious.

Okay looking at the link it appears that one can pay 110% of the previous year's taxes or 90% of the current year's estimated taxes. And then it says whichever is lesser. So it seems we can pay in April and get some interest on the money. But I will be asking our CPA when he gets back.

thank you both again!

[SuiteLiving]

The 110% is if your AGI was more than $150k last year. If it was less, you can just pay 100% of last year's tax liability and meet the safe harbor.

If you haven't paid in at that rate (whichever is the correct one for you) for your April and June ES tax installments, you'll need to get caught up (either now with an additional payment or with your September estimated tax payment). You'll wind up with a small estimated tax penalty, but I suspect it wouldn't be very much.

[TheLonelyGoatherd]

Originally Posted by SuiteLiving

The 110% is if your AGI was more than $150k last year. If it was less, you can just pay 100% of last year's tax liability and meet the safe harbor.

If you haven't paid in at that rate (whichever is the correct one for you) for your April and June ES tax installments, you'll need to get caught up (either now with an additional payment or with your September estimated tax payment). You'll wind up with a small estimated tax penalty, but I suspect it wouldn't be very much.

Thank you! I need to ask my husband about that since he makes the estimated payments.
We just want to make the most out of our money and I'm glad this board understands that

[Grlzrl]

Just an FYI, penalties are not usually that much. I often pay penalties because we have a wide swing from year to year in our income. It's not really that much and I don't really want to pay quarterly. I think where you really get into some serious money is interest.