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This may be a simple question, but not sure of the answer. I just sold some real estate and want to invest money for retirement. I owe some capital gains. Do I need to pay the tax now or can I put this money to work earning interest and then pay the capital gains tax next April 15. If I pay now I obviously loose the possible interest over the next 10 months on 20 % of the money...thanks for the help...Ted
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tednvon wrote:
I just sold some real estate and want to invest money for retirement. I owe some capital gains. Do I need to pay the tax now or can I put this money to work earning interest and then pay the capital gains tax next April 15

The tax system is designed to be a 'pay-as-you-go' system. That is to say that you are supposed to pay taxes as you receive income (or capital gains) during the year. This is why taxes are required to be withheld from your regular paycheck. Most people who receive income from investments have to pay quarterly estimated taxes for this reason.

If next Apr 15, you end up owing more than a certain percentage (10%, I think) of your total tax bill, then you will have to add a penalty to your tax bill.

-rkm
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http://www.irs.gov/ind_info/tax_trails/fig5-b.html

may be helpful for figuring out whether you have to pay estimated tax or not. [you probably do, unless you increase your witholding from your paycheck]

Also see

http://www.irs.gov/forms_pubs/pubs/p170502.htm

For more information, check the Tax Strategies board.
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rkm writes ---
If next Apr 15, you end up owing more than a certain percentage (10%, I think) of your total tax bill, then you will have to add a penalty to your tax bill.


Isn't this only true if your 2000 contributions don't meet 100% or 108% of your 1999 tax bill?

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Isn't this only true if your 2000 contributions don't meet 100% or 108% of your 1999 tax bill?

Yes, you are right.

-rkm
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