The IRS has reminded taxpayers that the third-quarter estimated tax deadline for 2024 is Sept. 16, and failing to make a payment could result in penalties. Estimated payments are necessary for individuals with income that does not have tax withholdings, such as self-employment earnings, investment or retirement income, and gig economy work. It is also important for individuals who have not withheld enough taxes from their full-time or part-time jobs. Not making estimated payments can lead to refund disappointment or balance due shock.
The IRS has provided a general rule of thumb to determine who should make estimated tax payments. Taxpayers should make payments if they expect to owe at least $1,000 in taxes after subtracting their withholdings and tax credits for the year. Additionally, individuals must meet safe harbor rules, which require paying at least 90% of the current year’s tax liability or 100% of the previous year’s taxes, whichever is smaller.
Missing quarterly estimated tax deadlines can lead to interest-based penalties, compounded daily based on the amount that should have been paid. Taxpayers affected by natural disasters may have extra time to make their payments, depending on their location. While there are multiple methods to pay estimated taxes, the IRS recommends electronic payments as the easiest, fastest, and most secure option. Taxpayers can use online accounts, IRS Direct Pay, or the Electronic Federal Tax Payment System (EFTPS) to make their payments, with debit and credit card payments incurring fees.
Photo credit
www.nbcnews.com