How to pay IRS taxes in advance for property sale - avoid end of year penalties?

Thanks for the info! I have a follow-up question - how do I actually calculate how much I should pay if I don't know exactly what my tax will be? Like, is there a percentage I should use or something? Also, are there specific deadlines for these quarterly payments?

For calculating how much to pay, a good rule of thumb is to set aside 20-25% of your profit from the sale (sales price minus your basis in the property). This should cover most situations, though the exact tax depends on your overall income and tax bracket. If it's a substantial gain, you might want to use the worksheets in the 1040-ES instructions or consult with a tax professional for a more precise estimate. The quarterly due dates are typically April 15, June 15, September 15, and January 15 of the following year. You'll want to make your payment for the quarter when you sell the property. For example, if you sell in August, the payment would be due September 15. Missing these deadlines can result in penalties even if you pay the full amount when you file.

How accurate was the estimate they gave you compared to what you actually ended up owing? I'm always skeptical of online tax calculators since they seem to miss important details about my situation.

Does it work with all kinds of property sales? I'm selling some collectibles next month and wondering if this would help with that too or if it's just for real estate?

The estimate was surprisingly accurate - I ended up being within about $200 of what they calculated, which on a 5-figure tax payment felt pretty spot on. They take into account your actual tax return history which makes it more personalized than generic calculators you find online. It definitely works for collectibles too! Actually, that's important because collectibles can be taxed at different rates than real estate (up to 28% vs the normal capital gains rates). The system asks what type of property you're selling and adjusts the calculations accordingly. It handles pretty much any type of property sale - real estate, collectibles, artwork, etc.

How does this actually work? I'm confused... the IRS never calls anyone back in my experience. Are you saying this service somehow gets you bumped up in the IRS queue?

Sounds like a scam to me. Nobody can magically get the IRS to call you back. I've been trying for weeks to get help with my estimated payments and the IRS is impossible to reach. I doubt this service does anything you couldn't do yourself.

It works by using an automated system that continuously redials the IRS for you until it gets through, then it holds your place in line. When an IRS agent is about to be available, you get a call connecting you directly to them. It's not about "bumping you up" in the queue - it's about doing the tedious waiting for you so you don't have to stay on hold for hours. I was skeptical too at first, but it's completely legitimate. The service doesn't actually talk to the IRS for you - it just gets you connected so you can talk to them yourself. The IRS doesn't know or care how you got through their phone system, they just answer when someone reaches the front of the queue. After waiting 3+ hours on multiple days trying to do it myself, getting connected in under 2 hours was absolutely worth it.

That's actually brilliant! I hadn't even thought about adjusting my W4 withholding. Could I just do a one-time big withholding from a single paycheck instead of spreading it out? My company pays quarterly bonuses and I could probably just have them take a chunk out of that instead of affecting my regular paychecks.

Yes, you absolutely can have a larger amount withheld from a single bonus check! That's often the perfect solution for handling a one-time event like a property sale. Your payroll department should be able to withhold a specific dollar amount from your bonus payment if you request it. The advantage of doing it this way is that withholding is treated as if it occurred evenly throughout the year, even if you do it in a lump sum later in the year. This can help you avoid underpayment penalties that might apply to quarterly estimated payments if you missed earlier deadlines. Just make sure to submit the revised W-4 before your bonus payment is processed.

Also remember to factor in state taxes! The IRS estimated payments only cover federal taxes. Depending on your state, you might need to make separate estimated state tax payments too.

This is such an important point that I wish I had known earlier! I'm actually in a similar situation - inherited some land from my uncle last year and was dreading the tax implications of selling it. I had no idea about the stepped-up basis rule and was calculating taxes based on what he paid for it decades ago. This could literally save me tens of thousands! Do you know if there are any special requirements for getting the property appraised at the time of inheritance, or can I use the value from the estate documents?

@Emma Davis You can typically use the value from the estate documents if they included a proper appraisal. Most estates are required to get professional appraisals for significant assets like real estate for estate tax purposes, so those values are usually accepted by the IRS as your stepped-up basis. If the estate didn t'get an appraisal, you might want to get a retrospective appraisal from a qualified appraiser who can determine what the fair market value was on the date of death. They can use comparable sales and other market data from that time period. Keep all the documentation - you ll'need it when you file your taxes and calculate the capital gains. The key is having credible evidence of the property s'value at the time of inheritance. Estate documents, professional appraisals, or even real estate agent market analyses from around that time can all help support your basis calculation.

This is really helpful information about the safe harbor rule! I had no idea that paying 100% of last year's tax could protect me from penalties. Quick question though - when you mention keeping records of what my grandparents paid plus improvements, how do I figure out the original purchase price if I don't have those records? The property has been in the family for decades and I'm not sure where to find that information. Also, does the stepped-up basis rule that @Paolo Esposito mentioned earlier override the need to know the original purchase price since my basis would be the value when I inherited it?