mechanics of paying a large tax bill

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crit
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mechanics of paying a large tax bill

Post by crit » Thu Nov 14, 2019 8:37 pm

We expect to owe six figures in taxes for FY2019 from an incentive stock option purchase. I have the money set aside (proceeds from a sale) in VMXX in our taxable at vanguard.

How does it work - I'll move it to cash, then a large ACH pull from that account?

Threads about banks flagging and holding large ACH motions have me wondering.

gmc4h232
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Re: mechanics of paying a large tax bill

Post by gmc4h232 » Thu Nov 14, 2019 8:46 pm

Can you pay half now as an estimated tax payment? That would cut the size of the ACH transfer

Alternatively, you can write a check, or use a CC on pay1040.com

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Blueskies123
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Re: mechanics of paying a large tax bill

Post by Blueskies123 » Thu Nov 14, 2019 8:48 pm

gmc4h232 wrote:
Thu Nov 14, 2019 8:46 pm
Can you pay half now as an estimated tax payment? That would cut the size of the ACH transfer

Alternatively, you can write a check, or use a CC on pay1040.com
There is a fee to use pay1040

gmc4h232
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Re: mechanics of paying a large tax bill

Post by gmc4h232 » Thu Nov 14, 2019 8:52 pm

Blueskies123 wrote:
Thu Nov 14, 2019 8:48 pm
gmc4h232 wrote:
Thu Nov 14, 2019 8:46 pm
Can you pay half now as an estimated tax payment? That would cut the size of the ACH transfer

Alternatively, you can write a check, or use a CC on pay1040.com
There is a fee to use pay1040
Yes there is, but so what? Use a 2% rewards card to offset the fee, or use a debit card which is just a minimal flat fee.

Gill
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Re: mechanics of paying a large tax bill

Post by Gill » Thu Nov 14, 2019 9:08 pm

I’m not clear on what the problem is. When the tax is due have Vanguard wire or ACH the funds to your checking account and mail a check to the IRS.
Gill
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BuddyJet
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Re: mechanics of paying a large tax bill

Post by BuddyJet » Thu Nov 14, 2019 9:12 pm

Can’t speak about vanguard but my approach is to put funds in a high interest checking account or money market that self liquidates to cover a check. Mail check for tax via certified mail on business day before tax is due.

This assumes you are within safe harbor.

Given the payment size, a check mailed certified has the least risk of problems from ACH or wire and the extra benefit of the float.
People say nothing is impossible. I do nothing all day.

Topic Author
crit
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Re: mechanics of paying a large tax bill

Post by crit » Thu Nov 14, 2019 11:53 pm

I don't have a cc with a limit anywhere near what we're going to owe. Sounds like certified check will do it, and I'll have to get started on the transfer ahead of time in case the bank flags and holds it.

In regards to safe harbor, I'm a bit worried about it actually. We owed ~4k (tax due was 4k over taxes withheld) last year, which was a "normal" year, normal withholdings; and made no changes in withholdings. I think this was within $1k the 90% limit for last year.

This year, my income will decrease by ~20% for leave, spouse's will slightly increase (and of course, the Taxable Event). So we won't have withheld 100% of last year's tax due, and we won't hit 90% of what's due ...

Is there anything I can do about it now, though?

Topic Author
crit
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Re: mechanics of paying a large tax bill

Post by crit » Fri Nov 15, 2019 12:00 am

Everything I've read about estimated payments says they have to be (mostly) equal, so I'm assuming a $100k payment on Jan 10th is problematic? Or will that fix the safe harbor problem?

HereToLearn
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Re: mechanics of paying a large tax bill

Post by HereToLearn » Fri Nov 15, 2019 12:02 am

I don't understand why you would need a certified check. The IRS and the state revenue office have both happily accepted large, regular checks.

Dude2
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Re: mechanics of paying a large tax bill

Post by Dude2 » Fri Nov 15, 2019 12:21 am

A quick Googling has this article How to pay the IRS. I've never had your specific problem, but I've done some TIRA to Roth conversions in years where I was unemployed. I've sent around 30-40k using EFTPS from credit union checking account. No issues.

EnjoyIt
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Re: mechanics of paying a large tax bill

Post by EnjoyIt » Fri Nov 15, 2019 12:28 am

I use EFTPS.gov for all my tax deposits. It’s easy and pulls directly from my checking account.

If you owe money when you do your taxes and want to pay that way, just write a check and put it in with your return as you normally would.

I don’t see what the problem is.

Believe me, no bank will hold anything with regards to paying the IRS via ACH or check.

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crit
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Re: mechanics of paying a large tax bill

Post by crit » Fri Nov 15, 2019 12:51 am

It's the transfer between our taxable at vanguard and my check-writing account that I'm worried about getting held up (the bank won't know it's my taxes getting transferred), and wondering whether there's another way.

I've posed the safe harbor question separately.

Thanks for the replies.

EnjoyIt
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Re: mechanics of paying a large tax bill

Post by EnjoyIt » Fri Nov 15, 2019 1:01 am

crit wrote:
Fri Nov 15, 2019 12:51 am
It's the transfer between our taxable at vanguard and my check-writing account that I'm worried about getting held up (the bank won't know it's my taxes getting transferred), and wondering whether there's another way.

I've posed the safe harbor question separately.

Thanks for the replies.
I have transferred 6 figure sums between vanguard and banks on multiple occasions with never an issue. I do not see why it should be an issue for you. If you are concerned call your bank and call vanguard to get their blessing and give yourself some peace of mind.

GoFish
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Re: mechanics of paying a large tax bill

Post by GoFish » Fri Nov 15, 2019 1:45 am

crit wrote:
Thu Nov 14, 2019 11:53 pm
I don't have a cc with a limit anywhere near what we're going to owe. Sounds like certified check will do it, and I'll have to get started on the transfer ahead of time in case the bank flags and holds it.

In regards to safe harbor, I'm a bit worried about it actually. We owed ~4k (tax due was 4k over taxes withheld) last year, which was a "normal" year, normal withholdings; and made no changes in withholdings. I think this was within $1k the 90% limit for last year.

This year, my income will decrease by ~20% for leave, spouse's will slightly increase (and of course, the Taxable Event). So we won't have withheld 100% of last year's tax due, and we won't hit 90% of what's due ...

Is there anything I can do about it now, though?
Once upon a time when I had a job, I would handle a situation like this by making a large salary draw and having all of it withheld. Accountant said that withholding could be lumpy, but estimated payments should be smooth.

So maybe you can have your entire November and December salary amounts directed to withholding?

livesoft
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Re: mechanics of paying a large tax bill

Post by livesoft » Fri Nov 15, 2019 6:20 am

I use absolutely free IRS Direct Pay:
https://www.irs.gov/payments/direct-pay
IRS wrote:Amount and frequency limitations
IRS Direct Pay won't accept more than two payments within a 24-hour period, and each payment must be less than $10 million. For larger electronic payments, use EFTPS or same-day wire.
I haven't run into the $10 million limit yet.
Wiki This signature message sponsored by sscritic: Learn to fish.

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RickBoglehead
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Re: mechanics of paying a large tax bill

Post by RickBoglehead » Fri Nov 15, 2019 6:35 am

EnjoyIt wrote:
Fri Nov 15, 2019 1:01 am
crit wrote:
Fri Nov 15, 2019 12:51 am
It's the transfer between our taxable at vanguard and my check-writing account that I'm worried about getting held up (the bank won't know it's my taxes getting transferred), and wondering whether there's another way.

I've posed the safe harbor question separately.

Thanks for the replies.
I have transferred 6 figure sums between vanguard and banks on multiple occasions with never an issue. I do not see why it should be an issue for you. If you are concerned call your bank and call vanguard to get their blessing and give yourself some peace of mind.
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motorcyclesarecool
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Re: mechanics of paying a large tax bill

Post by motorcyclesarecool » Fri Nov 15, 2019 6:42 am

Now might be a good time to rack up a few credit card bonuses.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

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galawdawg
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Re: mechanics of paying a large tax bill

Post by galawdawg » Fri Nov 15, 2019 6:53 am

crit wrote:
Thu Nov 14, 2019 11:53 pm
I don't have a cc with a limit anywhere near what we're going to owe. Sounds like certified check will do it, and I'll have to get started on the transfer ahead of time in case the bank flags and holds it.

In regards to safe harbor, I'm a bit worried about it actually. We owed ~4k (tax due was 4k over taxes withheld) last year, which was a "normal" year, normal withholdings; and made no changes in withholdings. I think this was within $1k the 90% limit for last year.

This year, my income will decrease by ~20% for leave, spouse's will slightly increase (and of course, the Taxable Event). So we won't have withheld 100% of last year's tax due, and we won't hit 90% of what's due ...

Is there anything I can do about it now, though?
If you are asking about the possible penalty for underwithholding, I'd recommend you consult with a tax attorney or CPA who can advise you on how to avoid or minimize the penalty. The quicker you act, the lower the penalty.

I'd recommend you consider setting your W-4 to withhold 100% of your pay and your wife's pay (or as close to 100% as you can get) in November and December. Every extra dollar you have withheld between now and December 31 is an extra dollar you won't pay the penalty on. You'll need to act quickly to get the W-4 to be effective for your November paychecks.

I'd also consider paying any remaining balance that would be due ASAP as the sooner you pay it, the lower the penalty. It appears that for every 100,000 you underpay, the penalty will be approximately $3,600 if paid on or after April 15, 2020. For every day early you pay the owed tax, the penalty is reduced by .0.00016. So paying the same 100,000 on or before November 20, 2019 should reduce the penalty to about $1,200. These are ballpark numbers.

Here is last years IRS form on calculating the penalty for underpayment of estimated tax so you can run some planning numbers: https://www.irs.gov/pub/irs-pdf/f2210.pdf

Again, I'd recommend you consult with a tax attorney or CPA to confirm this, but in the meantime, you may want to increase your withholding for your remaining 2019 paychecks AND pay a substantial amount, if not all, of the remaining tax due ASAP...

BuddyJet
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Re: mechanics of paying a large tax bill

Post by BuddyJet » Fri Nov 15, 2019 10:25 am

crit wrote:
Fri Nov 15, 2019 12:51 am
It's the transfer between our taxable at vanguard and my check-writing account that I'm worried about getting held up (the bank won't know it's my taxes getting transferred), and wondering whether there's another way.

I've posed the safe harbor question separately.

Thanks for the replies.
The immediate problem is the safe harbor. A quirk is that estimated payments are credited for the quarter paid but withholding for the year Is assumed to be even every quarter.

To use this quirk, adjust your withholding NOW to bring your withholding up to safe harbor level by year end. Even if it lowers your paycheck to almost zero. Put back to normal next year but be sure to get in safe harbor this year

Once in safe harbor, you do not have to make the big tax payment until April 15. This is all federal, state may be different.

Worry with large tax payment next year.
People say nothing is impossible. I do nothing all day.

Gill
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Re: mechanics of paying a large tax bill

Post by Gill » Fri Nov 15, 2019 10:31 am

crit wrote:
Fri Nov 15, 2019 12:51 am
It's the transfer between our taxable at vanguard and my check-writing account that I'm worried about getting held up (the bank won't know it's my taxes getting transferred), and wondering whether there's another way.
You're really worrying unnecessarily. A few days before you must write the check simply have Vanguard make the transfer to your checking account, either by wire or ACH. If by wire, you'll know that very same day that it is in your checking account. These transactions take place every day without a hitch.
Gill
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illumination
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Re: mechanics of paying a large tax bill

Post by illumination » Fri Nov 15, 2019 10:41 am

I've mailed large checks like that a few times for quarterly taxes from my personal checking account, no issues. I'm sure banks green light everything deposited to the Treasury Department. If they flagged every big check to the IRS it would cause so much chaos and lawsuits, all sorts of fines and penalties, etc.

snowman
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Re: mechanics of paying a large tax bill

Post by snowman » Fri Nov 15, 2019 10:49 am

motorcyclesarecool wrote:
Fri Nov 15, 2019 6:42 am
Now might be a good time to rack up a few credit card bonuses.
Yep, that was my thought as well. What a wonderful opportunity! Between OP and his spouse, they can make several thousand dollars.

runner540
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Re: mechanics of paying a large tax bill

Post by runner540 » Fri Nov 15, 2019 11:01 am

crit wrote:
Fri Nov 15, 2019 12:51 am
It's the transfer between our taxable at vanguard and my check-writing account that I'm worried about getting held up (the bank won't know it's my taxes getting transferred), and wondering whether there's another way.

I've posed the safe harbor question separately.

Thanks for the replies.
I recently made some similarly sized transfers from Vanguard and online savings to my main checking account (Chase) and there were no issues. Takes 2-3 business days to clear. Those accounts had been previously linked and all had my name on them.

HomeStretch
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Re: mechanics of paying a large tax bill

Post by HomeStretch » Fri Nov 15, 2019 11:14 am

crit wrote:
Thu Nov 14, 2019 8:37 pm
We expect to owe six figures in taxes for FY2019 from an incentive stock option purchase.
crit wrote:
Thu Nov 14, 2019 11:53 pm
This year, my income will decrease by ~20% for leave, spouse's will slightly increase (and of course, the Taxable Event). So we won't have withheld 100% of last year's tax due, and we won't hit 90% of what's due ...
Which tax quarter was the incentive stock option transaction made? If 4th quarter, you can adjust your payroll withholdings as suggested and/or make an estimated payment by 1/15/2020 to cover your resulting tax liability. There should be no penalty as long as your tax withholdings for the rest of your income was adequate and timely. You might have to complete Form 2210 with your Form 1040.

Depending on your 2019 income including the ISO transaction, the safe harbor rule could be 110% rather than the 100% you stated above.

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Re: mechanics of paying a large tax bill

Post by AlohaJoe » Fri Nov 15, 2019 11:32 am

crit wrote:
Thu Nov 14, 2019 8:37 pm
Threads about banks flagging and holding large ACH motions have me wondering.
Banks don't flag and hold large transactions involving the IRS because they know it is obviously not fraud.

Banks don't just look at the dollar amount when they make a decision like that. They are looking at the destination and deciding there is something fishy about it.

6 figures is not a lot of money to transfer online.

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Re: mechanics of paying a large tax bill

Post by TomatoTomahto » Fri Nov 15, 2019 11:36 am

BuddyJet wrote:
Fri Nov 15, 2019 10:25 am
crit wrote:
Fri Nov 15, 2019 12:51 am
It's the transfer between our taxable at vanguard and my check-writing account that I'm worried about getting held up (the bank won't know it's my taxes getting transferred), and wondering whether there's another way.

I've posed the safe harbor question separately.

Thanks for the replies.
The immediate problem is the safe harbor. A quirk is that estimated payments are credited for the quarter paid but withholding for the year Is assumed to be even every quarter.

To use this quirk, adjust your withholding NOW to bring your withholding up to safe harbor level by year end. Even if it lowers your paycheck to almost zero. Put back to normal next year but be sure to get in safe harbor this year

Once in safe harbor, you do not have to make the big tax payment until April 15. This is all federal, state may be different.

Worry with large tax payment next year.
That quirk, which I didn’t know of until last year, has since saved me a good amount of money :greedy :moneybag
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Re: mechanics of paying a large tax bill

Post by shess » Fri Nov 15, 2019 12:06 pm

crit wrote:
Thu Nov 14, 2019 11:53 pm
I don't have a cc with a limit anywhere near what we're going to owe. Sounds like certified check will do it, and I'll have to get started on the transfer ahead of time in case the bank flags and holds it.
Can you enable checkwriting on the Vanguard account? I see:
https://personal.vanguard.com/us/whatwe ... eckwriting

Dunno what a certified check is, but maybe you mean certified mail? I always just wrote checks to the IRS, even large checks. It's not my problem if their bank won't cash a large check!

I was always optional on certified mailing it, or with tracking, because while that tells me if it did get there, it doesn't do much if it didn't get there. If it did get there, they'll cash the check. If it didn't get there, will they ask me to prove that what I sent was my check?
crit wrote:
Thu Nov 14, 2019 11:53 pm
In regards to safe harbor, I'm a bit worried about it actually. We owed ~4k (tax due was 4k over taxes withheld) last year, which was a "normal" year, normal withholdings; and made no changes in withholdings. I think this was within $1k the 90% limit for last year.

This year, my income will decrease by ~20% for leave, spouse's will slightly increase (and of course, the Taxable Event). So we won't have withheld 100% of last year's tax due, and we won't hit 90% of what's due ...

Is there anything I can do about it now, though?
As others mentioned, withholding is counted across the year, so you can bump your withholding as much as possible and help a bit. Get moving, though, there can be a few weeks of lead time between making a withholding change and when it takes effect on a paycheck.

Otherwise, interest and penalties are based on how much time has elapsed since the estimated tax payment for the quarter the income was in. So if it was before September, paying today will result in lower penalties than tomorrow, etc. But if it was this quarter I'd just wait until January.

Also, it's for the net amount owed, so personally I just try to eyeball it and move on. If you owed $100k and only paid $95k, the tax and penalties are on the net $5k, NOT the original $100k owed. Usually what I found was that my laziness penalty was only like $50, or maybe a couple hundred dollars in a really high-income year, but it wasn't ever a super noticeable amount in the context of over overall tax bill.

FactualFran
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Re: mechanics of paying a large tax bill

Post by FactualFran » Fri Nov 15, 2019 3:24 pm

crit wrote:
Fri Nov 15, 2019 12:00 am
Everything I've read about estimated payments says they have to be (mostly) equal, so I'm assuming a $100k payment on Jan 10th is problematic? Or will that fix the safe harbor problem?
In that case, everything you have read about estimated payments is incorrect.

It is the case that if one paid the same amount of estimated tax on each of the four payment due dates, then the Short Method on Form 2210 may be used to calculated the underpayment penalty. Otherwise the Regular Method on Form 2210 would be used. However, in most cases it is not necessary for a taxpayer to calculate underpayment by using either of those methods. The IRS will do the calculations and send an underpayment notice if the IRS has calculated that there was an underpayment.

One case where a taxpayer would use the Regular Method is if the income was sufficiently different for different quarters that completing Schedule AI of Form 2210 would reduce or eliminate underpayments.

It is likely that a $100k payment for the fourth quarter, with no payments made for previous quarters, would likely result in the IRS sending an underpayment notice, unless you file Form 2210 with Schedule AI completed with your income tax return. Completing Schedule AI of Form 2210 could reduce or eliminate underpayments.

I don't know what you mean by "the safe harbor problem". The safe harbor in this context requires that timely quarterly payments have been made. The sum of payments by each quarterly due date of $0, $0, $0, and $100k would very likely not be timely. The sum of payments by each quarterly due date of at least $25k, $50k, $75k, and $100k would very likely have been timely.

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crit
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Re: mechanics of paying a large tax bill

Post by crit » Fri Nov 15, 2019 3:42 pm

The problem with the $25k/quarter payments is that we did not anticipate the Great Taxable Event in July. I cannot see a world in which I would have paid $25k to IRS in April, for no taxable reason at that time.

HomeStretch
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Re: mechanics of paying a large tax bill

Post by HomeStretch » Fri Nov 15, 2019 3:54 pm

With the additional information that the ISO transaction occurred in Q3 (July), adjust your Nov/Dec payroll withholdings and make an estimated payment as soon as possible to satisfy the safe harbor rule in order to minimize the penalty and interest by check or ACH.

MotoTrojan
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Re: mechanics of paying a large tax bill

Post by MotoTrojan » Fri Nov 15, 2019 4:00 pm

If you have more than 100% of last years federal tax bill in withholdings you can wait to pay it come tax season. Look up exact details, believe safe harbor rules.

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crit
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Re: mechanics of paying a large tax bill

Post by crit » Fri Nov 15, 2019 4:02 pm

I don't think we can make up the gap to 110% by sending all income to withholding now. I'm checking the numbers twice, though.

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galawdawg
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Re: mechanics of paying a large tax bill

Post by galawdawg » Fri Nov 15, 2019 4:25 pm

What have you had withheld this year from your paychecks? If having all of your remaining salary this year withheld doesn't get you up to 100% of your tax from last year, you have seriously under-withheld this year even without considering your incentive stock option purchase.

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crit
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Re: mechanics of paying a large tax bill

Post by crit » Fri Nov 15, 2019 4:37 pm

We left withholding numbers same as last year, but we will earn and withhold less in absolute numbers due to my leave. Our withholdings this year were appropriate for this year's regular income.

Because of our income, we'd need to hit 110% of last year's tax due, so the gap between 110% of last year and this year's lower numbers is bigger than 8% (one month) of salary. I'm calculating things more carefully, and we may come close.

jambadoc
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Re: mechanics of paying a large tax bill

Post by jambadoc » Fri Nov 15, 2019 4:45 pm

In person at the office... In pennies. :moneybag

JGoneRiding
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Re: mechanics of paying a large tax bill

Post by JGoneRiding » Fri Nov 15, 2019 5:00 pm

crit wrote:
Thu Nov 14, 2019 11:53 pm
I don't have a cc with a limit anywhere near what we're going to owe. Sounds like certified check will do it, and I'll have to get started on the transfer ahead of time in case the bank flags and holds it.

In regards to safe harbor, I'm a bit worried about it actually. We owed ~4k (tax due was 4k over taxes withheld) last year, which was a "normal" year, normal withholdings; and made no changes in withholdings. I think this was within $1k the 90% limit for last year.

This year, my income will decrease by ~20% for leave, spouse's will slightly increase (and of course, the Taxable Event). So we won't have withheld 100% of last year's tax due, and we won't hit 90% of what's due ...

Is there anything I can do about it now, though?
Yes increase your payroll withholdings for dec. Potentially to 100% of your income. These are auto matically considered "equal" payments. You want the total taxes paid for this year by withholding to equal 100% of the taxes DUE last year.

Gill
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Re: mechanics of paying a large tax bill

Post by Gill » Fri Nov 15, 2019 5:15 pm

JGoneRiding wrote:
Fri Nov 15, 2019 5:00 pm

Yes increase your payroll withholdings for dec. Potentially to 100% of your income. These are auto matically considered "equal" payments. You want the total taxes paid for this year by withholding to equal 100% of the taxes DUE last year.
No, 110% as per OP stating that his AGI exceeds $150,000.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

Cyanide123
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Re: mechanics of paying a large tax bill

Post by Cyanide123 » Fri Nov 15, 2019 5:26 pm

crit wrote:
Thu Nov 14, 2019 11:53 pm
I don't have a cc with a limit anywhere near what we're going to owe. Sounds like certified check will do it, and I'll have to get started on the transfer ahead of time in case the bank flags and holds it.

In regards to safe harbor, I'm a bit worried about it actually. We owed ~4k (tax due was 4k over taxes withheld) last year, which was a "normal" year, normal withholdings; and made no changes in withholdings. I think this was within $1k the 90% limit for last year.

This year, my income will decrease by ~20% for leave, spouse's will slightly increase (and of course, the Taxable Event). So we won't have withheld 100% of last year's tax due, and we won't hit 90% of what's due ...

Is there anything I can do about it now, though?
Make multiple payments with the credit card, in between pay off your credit card each time. Will take a few days, but easy to do. It's always better if you have a credit card with high rewards. For example, i pay 6 figure taxes, i use my alliant 2.5 percent card for that. In the first year, the alliant card gives 3 percent cash back. That's a lot of cash back :)

For example: next quarter i have to pay 46k in taxes. My alliant card credit limit is 15k. A month before taxes are due this quarter, I'll start making 14k payments, and will immediately pay it off. Then I'll wait for a few days for the payment to process, then repeat.

shess
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Re: mechanics of paying a large tax bill

Post by shess » Fri Nov 15, 2019 9:03 pm

crit wrote:
Fri Nov 15, 2019 4:37 pm
Because of our income, we'd need to hit 110% of last year's tax due, so the gap between 110% of last year and this year's lower numbers is bigger than 8% (one month) of salary. I'm calculating things more carefully, and we may come close.
It sounds like you're not going to make the safe harbor. So IMHO, don't worry about the safe harbor any more, just worry about minimizing the penalties and interest.

So, the idea with withholding is that it is deemed as "on time" pretty much whenever you paid it. So any improvement you can make by adjusting withholding now will help by lowering your penalty-and-interest amount.

Additionally, if you received the big income lump in July, then you would have paid the as-you-go estimated payment in September, so you are late on that. If you pay it now using the September voucher, you're only two months late. If you wait until January, you're four months late, if you wait until April you're 7 months late. If I have unexpected lumpy income, say due to realizing some LTCG, I just multiply by 15% (or 20%, or whatever my marginal rate for that income is), and send that as the next estimated payment check. Maybe I'll add $500 to cover the error bar, though I'll not do that twice (like if I have lumpy income in June and November, say). Sooner is better.

Yes, that does imply I give the IRS a "free" loan sometimes. Whatever, I usually don't have unexpected income bumps, and when I do have unexpected income I have cash available to make that free loan with.

Ferdinand2014
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Re: mechanics of paying a large tax bill

Post by Ferdinand2014 » Fri Nov 15, 2019 9:04 pm

crit wrote:
Thu Nov 14, 2019 8:37 pm
We expect to owe six figures in taxes for FY2019 from an incentive stock option purchase. I have the money set aside (proceeds from a sale) in VMXX in our taxable at vanguard.

How does it work - I'll move it to cash, then a large ACH pull from that account?

Threads about banks flagging and holding large ACH motions have me wondering.
Personal check. Done it many times over $100,000. Unless it is over $100,000,000, then write 2 checks.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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galawdawg
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Location: Georgia

Re: mechanics of paying a large tax bill

Post by galawdawg » Fri Nov 15, 2019 10:46 pm

crit wrote:
Fri Nov 15, 2019 4:37 pm
We left withholding numbers same as last year, but we will earn and withhold less in absolute numbers due to my leave. Our withholdings this year were appropriate for this year's regular income.

Because of our income, we'd need to hit 110% of last year's tax due, so the gap between 110% of last year and this year's lower numbers is bigger than 8% (one month) of salary. I'm calculating things more carefully, and we may come close.
How many more paychecks do you and your wife expect this year? If you are each paid at the end of the month you could potentially withhold two months of salary each.

retired early&luv it
Posts: 77
Joined: Sun Feb 22, 2015 8:52 am

Re: mechanics of paying a large tax bill

Post by retired early&luv it » Sat Nov 16, 2019 5:23 pm

Is there a reason you do not want to get Vanguard check writing on your settlement account and then use Vanguard checks to pay IRS?

I use my Vanguard checks for five-digit estimated tax payments every few months. But I have never written a six digit check, if there is an upper limit on those checks I am not aware of it. You could call them and ask.

If you were nervous about mailing a check that size, is there an IRS office in your community where you can drop off a check? IRS has offices in many communities, I had to write out a really big check to them several years ago, I drove over to their office and handed it to them.

If you mail a check that large, you might want to get tracking on the envelope.

Roslo
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Joined: Fri May 10, 2019 12:17 am

Re: mechanics of paying a large tax bill

Post by Roslo » Sun Nov 17, 2019 2:43 am

I use ACH and wires both, and I believe they are equally secure. I like to use wires since I believe they are bit faster.

Be sure to check your bank's policy about them - some charge. Vanguard does not charge to SEND a wire, and my bank does not charge to RECEIVE a wire, so wires Vanguard => My Local Bank are free to me.

In the other direction (My Local Bank => Vanguard) I use ACH since I believe my bank charges to SEND a wire.

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