I didn't realize that I had to make quarterly tax payments to the IRS as I am new to investing. I had set aside the money to pay all of the tax that was owed so that is not an issue. I am just trying to figure out how to lower or avoid the underpayment penalty. Apparently there is a safe harbor if
You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year, or
You owe less than $1,000 in tax after subtracting withholdings and credits
Just looking for some advice.
Capital Gains Irs Tax Payment
byu/Temporary_Injury7410 intax
Posted by Temporary_Injury7410
8 Comments
How much in capital gains do you have? Do you have any other income and are you withholding any taxes on that income?
Most people don’t have to worry about estimated taxes on capital gains since they’re withholding taxes from their job.
100k in gains
I have a job and have taxes withheld from my paycheck by my employer. My pay is similar to the gains.
I am hoping since I can still pay Q4 in time maybe I can trigger the safe harbor
You say you’re new to investing, so you might meet one of those safe harbors. Your job withholds tax from your paychecks. That is tax you have already paid during 2025.
If you only had a small amount of investment profits compared to your income, then the amount of tax you’ve already paid might be over 90%, or within $1000, of what you owed.
Or if the amount you paid during 2025 would have been enough to pay your 2024 taxes – when you didn’t have investments – that also avoids the penalty.
Even if you don’t quite meet one of these safe harbors, they set the amount that you were required to pay. So your underpayment penalty is based on these smaller numbers rather than the full amount you owe for 2025.
It’s better if it comes out of your paycheck because it’ll be assumed to be even throughout the year, but if not, your Q4 payment can help minimise your penalty. If it exists. You may have to do the annualisation method.
Well you know about safe harbor, the 90% this year or 100% or 110% of last year.
If this is your first year, then last years tax liability should be higher than this years, assume a stable/steady day job. So mostly likely good.
So you should be able to see if you made safe harbor from your day job’s withholdings. If not or not sure, just make a 4th qtr est tax payment. IRS has two online ways (one with login and one without) to make payments. The other way is just snail mail a check.
I think the login type they snail mail you a pin, so it could be tough to have it ready by Jan 15, fyi
Hope that helps. Good luck
Figure out the safe harbor number and how much you’ve paid in taxes so far through withholding in your paycheck.
Make a payment that gets you to 75% of safe harbor immediately. It’s already late but doing this now will save you four months of penalties and interest between now and April. Pay the remaining 25% by Jan 15.
Usually the first year of investing you are protected by the safe harbor rules in the 2210 penalty form. But subsequent years you may have a penalty. In 2025 the penalty was 4.7% of tax not paid until April. Some people say this penalty is small compared to the amount of paperwork for all the estimated taxes. I myself will owe $30K estimated taxes in 2026. And find its worth the extra paperwork to avoid $1400 in penalties.