La Plata, MD asked in Tax Law for Maryland

Q: Do I HAVE to pay taxes on large capital gain (through estimated tax payments or withholding) before filing tax return?

Apparently, the IRS is not equipped to answer "tax law" questions outside of the January 1 - April 18, 2018 window. Maybe someone here can help me. I recently sold several long-held shares in stocks and mutual funds, realizing a large capital gain. To avoid any penalties, do I HAVE to pay taxes on these capital gains before I file my 2018 tax return (in 2019). I know that I can estimate my tax liability and make quarterly payments during 2018, or increase the withholding from my pension, but my question is do I have to? My withholding (from my pension) in 2018 will be greater than 100% of my 2017 tax. Thank you for your assistance.

Related Topics:
1 Lawyer Answer
Eric Steven Day
Eric Steven Day
Answered
  • Tax Law Lawyer
  • Henderson, NV

A: You don't have to pay estimated taxes on the large capital gains you incurred in 2018. It is a good idea to pay estimated taxes or have them withhold some of the gains to pay taxes, but it is not a requirement. If you did not owe taxes the prior year, then you are likely not required to make estimated tax payments. If you were required to make estimated tax payments (based off 2017 tax filings), then you can be penalized for not doing so if you owe in 2018, but you are not required. Realize though, you will have penalties if you can't pay by April 15, 2019. Even if you have a balance due at that time and you still can't make the payments, you can always set up an installment agreement with the IRS to pay the debt off over time, like a loan. Let me know if you have any other questions.

Linda Simmons Campbell agrees with this answer

1 user found this answer helpful

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.