# IRS Underpayment Penalties



## Angry American (Nov 26, 2019)

Hello everyone. I just joined this forum today and I am looking forward to discussing some tax-related matters here. As my handle indicates, I'm not happy after recently learning of all the tax complications that being an American expat involves. I have American citizenship and been living in Belgium the past two years.

I have some stock investments in America, and over the past few months I've sold some of them in order to have some money to buy a condo in Belgium. I assume this will trigger a tax burden in the US of around $15,000 for 2019. I was hoping to simply write a check for this amount next year when I do my taxes. But of course nothing can just be hassle-free, even when you're paying!

Now I have learned about the (severe) underpayment penalties imposed by the US. What a headache! I received these distributions within the past two months, so hopefully I can take action now to avoid fines.

I have never owed over $1,000 in taxes at year-end, but for 2019 I certainly will. Last year I didn't owe anything at all. I actually got some money back for the child tax credit, diminished a bit by the dividends received.

Could anyone tell me if the underpayment penalties also apply to gains from stock distributions? I have no other US-based income.

If I am in fact liable, how should I go about estimating these taxes and making the payment to the IRS ASAP?

Thanks a ton for the help!


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## Bevdeforges (Nov 16, 2007)

There are quarterly Estimated Tax forms you can use. You file a 1040-ES by the deadline for the quarter in which you have income that isn't otherwise subject to withholding and you make your payment based on the information you have at the time.

The goal is supposed to be to have already paid at least 90% of what your tax obligation turns out to be. But there has traditionally been a "safe haven" rule, explained in Publication 505:



> General Rule
> In most cases, you must pay estimated tax for 2019 if both of the following apply.
> 
> 1.) You expect to owe at least $1,000 in tax for 2019, after subtracting your withholding and refundable credits.
> ...


Note 2b. If you have had withholdings or pay in estimates that at least equal your actual tax bill last year, you may get a pass. If this is a one-off event, I'd go with that version of the safe-haven rule and just make sure you've paid in at least as much as you owed last year. 

More info on estimated payments here: https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes


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## Alltimegreat1 (Feb 25, 2015)

Good information.

I have heard that fines have become more severe for this recently.


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