I fired up TaxAct to investigate my estimated tax, or rather lack of it, scenario. What do you know, TaxAct says I owe a little bit of penalty. After initially spending time to enter in all my stock trades and dividends, I got so tired of it and thought I would come back to examine the result a bit closer. Hence, I did not notice this penalty earlier. One thing about using a tax program is that I may not appreciate all the things that go on behind the scene.
OK, so where's the Form 2210? Yes, it is here. TaxAct filled it out for me, and put all of my investment incomes, plus IRA withdrawal at the last quarter, and that resulted in minimal penalty. However, that was not true as I had some income throughout the year. Why did it not distribute at least my stock trades throughout the year, as I already entered in the dates of these transactions for Schedule D (Capital Gains and Losses)? Lazy programmers?
I used the Quicken's income report feature to bracket the various date ranges to get the dividends in each quarter. It also told me about cap gain/loss, but Form 2210 wanted a break down of long and short-term cap gains. Fine. I had to go back to TaxAct to look at what I entered in, wrote the numbers down for each trade, and added them up myself for each quarter.
When that was all done, maybe one hour of work, the result was...
... the penalty was unchanged. What the heck?
It turned out that the income from my after-tax account was small enough that it got cancelled out by the standard deduction and exemption ($20,500) that was also spread out for each quarter. How about that for fairness? Hence, the small penalty was only for that year-end IRA distribution that I did not have taxes withheld on.
Learn something everyday. And by the way, I recently dug into the tax code, and saw why I still carried more than $1K worth of foreign tax credit from previous years, yet could take the one incurred in 2016. I thought TaxAct messed up, but no, it was due to peculiarities in the tax codes.
It would be hard to do this all by hand. One could go insane.