Backstory:

A few years ago, we sold enough stock to buy a house. Something like $250k. After doing our taxes for that year, the CPA made a comment to my wife along the lines of "if this happens a second year in a row, you'll owe penalties". We also apparently got some forms that make it possible to pay taxes quarterly ahead of time.

My wife is now in mortal fear of ever selling stock again because of these "penalties" and doesn't know how to use the forms. There's no info on them about what to do with the form once you fill it out.

Question: 

We googled these "penalties" and apparently if you owe more than $1000, you can be charged 6%. It is obviously extremely common to owe more than $1k in taxes and I've never heard of anyone paying quarterly or being charged a penalty for it.

Am I out of the loop and penalties are extremely common? What is the real, actual rule as enforced? When are penalties actually accrued? Are we OK to be selling stock in $15-50k segments throughout a year to pay for college without fear of penalty or do we have to figure out whatever these quarterly forms are? If we've already sold $30k-$50k of stock this year without doing quarterly forms, should we panic-pay a big chunk to the IRS today (12/31) to avoid penalties?
The IRS does require taxpayers to pay their taxes throughout the year, not just at the end when they file their tax return. This can be done through withholding from your income or through estimated tax payments. If you don't pay enough tax throughout the year, you could be liable for an underpayment penalty. This is most likely what your CPA was referring to. 

The general rule is that you must pay at least 90% of your current year's tax liability or 100% of last year's tax liability (110% if your adjusted gross income was more than $150,000), whichever is smaller, to avoid an underpayment penalty. If you owe more than $1,000 when you file your tax return, you could be subject to the penalty.

However, these rules don't apply to everyone. Some taxpayers, such as retirees, farmers, and fishermen, may have different rules. Additionally, the IRS does waive the penalty in certain circumstances, like if the underpayment was due to a casualty event, disaster, or other unusual circumstance and it would be inequitable to impose the penalty.

As for your question about selling stock, it really depends on your overall tax situation. If the sale of the stock results in a significant capital gain, you could owe more in taxes. If that's the case, you may need to make estimated tax payments to avoid an underpayment penalty. The form you mentioned is likely Form 1040-ES, used to calculate and pay estimated taxes.

If you've already sold a significant amount of stock this year, you may want to consider making an estimated tax payment. The fourth quarter deadline for 2021 is January 18, 2022, so you have some time to determine whether a payment is necessary.

Remember, everyone's tax situation is unique, so it's always a good idea to consult with a tax professional. They can help you understand your tax liability and whether you need to make estimated tax payments.
### Human
Backstory:

A few years ago, we sold enough stock to buy a house. Something like $250k. After doing our taxes for that year, the CPA made a comment to my wife along the lines of "if this happens a second year in a row, you'll owe penalties". We also apparently got some forms that make it possible to pay taxes quarterly ahead of time.

My wife is now in mortal fear of ever selling stock again because of these "penalties" and doesn't know how to use the forms. There's no info on them about what to do with the form once you fill it out.

Question: 

We googled these "penalties" and apparently if you owe more than $1000, you can be charged 6%. It is obviously extremely common to owe more than $1k in taxes and I've never heard of anyone paying quarterly or being charged a penalty for it.

Am I out of the loop and penalties are extremely common? What is the real, actual rule as enforced? When are penalties actually accrued? Are we OK to be selling stock in $15-50k segments throughout a year to pay for college without fear of penalty or do we have to figure out whatever these quarterly forms are? If we've already sold $30k-$50k of stock this year without doing quarterly forms, should we panic-pay a big chunk to the IRS today (12/31) to avoid penalties?

### Assistant
The IRS does require taxpayers to pay their taxes throughout the year, not just at the end when they file their tax return. This can be done through withholding from your income or through estimated tax payments. If you don't pay enough tax throughout the year, you could be liable for an underpayment penalty. This is most likely what your CPA was referring to. 

The general rule is that you must pay at least 90% of your current year's tax liability or 100% of last year's tax liability (110% if your adjusted gross income was more than $150,000), whichever is smaller, to avoid an underpayment penalty. If you owe more than $1,000 when you file your tax return, you could be subject to the penalty.

However, these rules don't apply to everyone. Some taxpayers, such as retirees, farmers, and fishermen, may have different rules. Additionally, the IRS does waive the penalty in certain circumstances, like if the underpayment was due to a casualty event, disaster, or other unusual circumstance and it would be inequitable to impose the penalty.

As for your question about selling stock, it really depends on your overall tax situation. If the sale of the stock results in a significant capital gain, you could owe more in taxes. If that's the case, you may need to make estimated tax payments to avoid an underpayment penalty. The form you mentioned is likely Form 1040-ES, used to calculate and pay estimated taxes.

If you've already sold a significant amount of stock this year, you may want to consider making an estimated tax payment. The fourth quarter deadline for 2021 is January 18, 2022, so you have some time to determine whether a payment is necessary.

Remember, everyone's tax situation is unique, so it's always a good idea to consult with a tax professional. They can help you understand your tax liability and whether you need to make estimated tax payments.<eos_token>