If I sell a bunch of stocks this year and owe ~5k in capital gain at tax time next year, do I have to pay any penalty on that to IRS. I would most likely owe this amount if I choose not to change my withholding. I had a refund from IRS this year if that's relevant.
No penalty if you pay by the end of tax season next year. Just put $5k in a high yield savings account until then.
To add on to what was said above, some states do make you pay a penalty if you drastically under withold which is bullshit, but alas. Got nailed by NY one year thanks to that.
Make sure to pay 110% of last years liability to avoid the underpayment penalty.
Over-withholding is not the only way to pay taxes. You can pay taxes directly to IRS. One pays estimated taxes that way, for example.
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Capital gains and withholding are two different things
That tells you how much I know? Hence seeking experts out. But I can change withholding to have more taken towards taxes and come tax time, that can cover some of capital gain taxes. Is that incorrect?
Thatβs where you should be, financial advisor