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I have researched the Fool archives as well as other resources on the net and have read various commentary on: 1) when one is required to pay estimated taxes; and 2) when one is subject to a penalty with respect to either failing to sufficient taxes and/or failing to pay taxes due in a timely manner.

I think I understand the if's, and's and but's as far as when estimated taxes are required. I get confused, however, in reading when the penalty applies. For example, it appears that a person could technically incur a penalty even though he pays 100% (or more) of total tax due, or even if he is due a refund for the tax year.

As best I can comprehend, the above example would occur as a result of the person failing to pay his taxes timely. Even that part makes sense.

My specific sticky point is determining what constitutes "timely." My wife and I are retired, and our pensions are subject to routine withholding each month. I have even included additional taxes be withheld to accommodate routine dividend, interest and other incidental income (excluding capital gains) anticipated throughout the year.

I exclude capital gains because I typically buy and hold. I might go several years without realizing a capital gain. For that reason, I have just been dealing with the gains as they occur.

With all of the above facts in mind, if I realize an unanticipated spike during a year due to a capital gain and that gain (when added to all of the income from other sources) is going to result in additional taxes due of $1,000 or more, is it considered "timely" for me to pay the taxes (at least enough to bring the overall additional taxes due to below $1,000) resulting from the gain by the applicable due date for the quarter during which the gain was realized?
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