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I am a newbie to stock and options trading. I trade on Robinhood (I guess the tax system should be same regardless the platform). It would be great to have answers on these questions. Thanks in advance!

Should I pay tax on dividend and/or capital gains on taxes/options earned right away or should I wait till the tax filing season? Someone mentioned that I need to pay the tax accrued on the capital gains right away in EFTPS. I know how to compute the tax based on my income bracket. Now I computed the tax on my short/long term taxes on the trading and pay it to EFTPS directly or can I wait to file in April? And is there any caveat that I need to be aware of? Suppose my estimated tax did not exactly match the real tax that will be reported on 1099 provided by robinhood. In that case, what should I do?

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  • Related: Estimated Tax on Unplanned Capital Gains, but you should clarify if you have W-2 withholding or not.
    – Morrison Chang
    Oct 9, 2020 at 1:51
  • Also money.stackexchange.com/questions/95767/… and more linked there (by me). Note if you do need to make estimated payments for income tax they must be by specified 'quarter' dates within the year but you are not required to use EFTPS; you can use the direct-pay methods on the IRS website or simply mail a check with 1040ES. (In contrast employment taxes -- FICA, FUTA, and withholding -- must be paid by EFTPS except for very small amounts that are allowed to be paid with the returns.)
    – dave_thompson_085
    Oct 9, 2020 at 4:56
  • Also the broker (robinhood) will not report tax on 1099, only the transactions. You -- or your preparer/service/software -- report the transactions from 1099-B/DIV/INT/OID on your return (using Schedule D and form 8949, or Schedule B) and compute the resulting tax.
    – dave_thompson_085
    Oct 9, 2020 at 4:59

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There's a lot of leeway for error with estimated taxes. In general, there's no penalty if you owe less than $1,000 or you pay at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.

Throughout the year, I keep track of my dividends and realized gains so I know where I stand. For most of the past 20 years, I have just sent a December estimated payment because apart from knowing the total of these taxable items, that's when I make my taxable annual annuity withdrawals. In some years I have had some really outsized realized capital gains and in those years, I made estimated payments in earlier quarters. Not once in 20 years has the IRS dunned me for late payments nor have they assessed any penalties or fees.

Despite this, you should speak with an accountant.

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