Free Tax Tips

Question: is there a tax penalty for underpayment if I sell stock for huge capital gain december 09?

If I day trade in December and have to pay short term capital gain on 500k profit, would i have to pay a tax penalty for underpayment since I did not make estimated quarterly payment to IRS?

Answer: There is a penalty for making sufficient prepayments through withholding or writing a check. The IRS computer assumes you earned income in equal increments during the year unless you tell it otherwise. You will owe a large estimated tax payment on January 15, 2010. You will need to compute the proper amount of the penalty---zero could be the proper amount--on Form 2210 using the annualized method.

Answers to some questions about converting to a Roth IRA

A new law allows high-income investors to convert traditional individual retirement accounts and 401(k) plans to Roth IRAs. Here are answers to questions from USA TODAY readers about the pros and cons of such a conversion.

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