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After selling a house, I've now added a large long-term Capital Gains amount to my taxes this year. Knowing this was likely (and thanks to earlier advice), I set my withholding this year so I am well over the "Safe Harbor" amount based on last year's taxes but with the current figures I am still likely to owe a large amount next year.

I'm thinking I would rather make one large payment now directly out of the money I received for the house rather than either increase my withholding and see a very small paycheck, or wait till next year to face a large bill.

Looking at the comment on this question How can I make a one-time income tax prepayment to the US Treasury? it says "if you want to make a prepayment that is fine". However, in that question they were in the last quarter - would I need to make two equal payments as we are in the third quarter?

Other than the loss of possible interest on this money are there any pitfalls to doing this? (eg attract the attention of the IRS, add confusion to my tax return next year, etc)

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  • Isn't loss of interest bad enough...? But otherwise I think the answer is 'no', and paying now would just be what the IRS loves and recommends. I leave a full answer to more qualified people though.
    – Aganju
    Aug 14, 2016 at 0:57

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The purpose of making sure you met the safe harbor was to avoid the penalty. Having achieved that goal the tax law allows you to wait until April 15th to pay the balance. So do so.

Put enough money aside to make sure you can easily make that payment.

I was in this exact situation a few years ago. I planned my w4 to make the safe harbor, and then slept easy even though the house settlement was in May and I didn't have to make the IRS payment unti 11 months later in April.

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