The January 16 Deadline for Fourth-Quarter Estimated Tax Payments
The Internal Revenue Service (IRS) has reminded taxpayers that the deadline for fourth-quarter estimated tax payments is January 16. Failure to make the payment may result in a surprise bill or penalty. While many employers withhold taxes from paychecks, separate payments are required for other sources of income such as freelancing, small business, or investment earnings. If your expected tax liability for 2023 is $1,000 or more, you must make quarterly estimated payments. Making these payments before the deadline helps you avoid additional payments to the IRS on April 15.
Understanding the ‘Safe Harbor’ Rules
To avoid an underpayment penalty, taxpayers can follow the “safe harbor” guidelines. This involves paying at least 90% of the current year’s tax liability or 100% of last year’s taxes, whichever is smaller. However, if your adjusted gross income in 2022 was $150,000 or more, you need to pay the lesser of 90% of the current year’s tax liability or 110% of last year’s taxes. It is important to consider a tax projection for 2023 to meet these requirements.
Methods for Making Quarterly Estimated Tax Payments
The IRS recommends electronic payments as the fastest and easiest option for remitting funds. Other methods include sending a check via certified mail with a return receipt to ensure proof of timely payment.
Hot Take: Avoid Penalties by Meeting the Deadline
To avoid penalties and surprise bills when filing your taxes in 2024, it is crucial to make your fourth-quarter estimated tax payment by January 16. By following the IRS guidelines and making timely payments, you can ensure compliance and save yourself from unnecessary financial burdens.
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