| Help for estimated tax payment |
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DickK
New Poster
Cash: $ 0.50
Posts: 2
Joined: 01 Sep 2005
Location: No. Va.
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| Help for estimated tax payment |
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Based on what (little) I know I think I'm in a position where I need to send a $big$ check to the IRS for estimated tax due this year. The trigger for this situation was the acquistion in July of the company I work for. It was an all cash acquisition that effected me three ways:
The company stock I held in a brokerage account was purchased and is now there in cash.
The qualified ISO options I held were exercised and the net paid out with NO withholding
The non-qualified options I held were exercised and the net paid out with withholding at 31%
Here's what I think the situation is
1. The tax implication of the first item is capital gains tax at 15% (all stock having been held for >1year).
2. The tax implication of the second item is a big ordinary income hit that I'll owe taxes on and nothing so far has been withheld.
I think all that means I need to send the IRS a big check equal to 15% of estimated gain on the stock sale plus ~ 30% of the amount realized in the qualified option transaction.
So, am I even close here? Are there any alternatives open to me? Since this event represents a major spike in my typical annual income (roughly triples it) can I (should I) income average? Or...?
Any advice and counsel will be appreciated 
Thanks in advance -- Dick
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Thu Sep 01, 2005 7:21 pm |
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efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
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A good place to start may be http://www.irs.gov/
You may either need to file a new W-4 form with your employer to withhold enough tax the remainder of the year (which I did for the gain of cashing out a whole life policy and partial IRA to Roth IRA conversion), or file quarterly estimated tax. For example you could file a W-4 with zero exemptions plus additional payment per paycheck if required. Otherwise if you owe more than $1000 at tax time, you might get hit with a penalty, and possibly manditory withholding for investment payouts.
You also have to consider whether the extra money will throw you into a higher marginal tax bracket or alternative minimum tax (which could eliminate some deductions).
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Mon Sep 12, 2005 7:22 am |
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