08 Jan 2024 Don’t Miss the January 16th Deadline for Final 2023 Quarterly Estimated Tax Payments
The IRS has recently issued a reminder to taxpayers about the upcoming deadline of January 16th for the final 2023 quarterly estimated tax payments. This is particularly important for those who may not have paid enough tax throughout the year to avoid a potential penalty or unforeseen tax bill when filing in 2024.
Taxes are typically paid throughout the year via withholding tax from paychecks, making quarterly estimated tax payments to the IRS, or a combination of both. This method ensures that taxpayers pay most of their taxes during the year as income is earned or received.
Who should be mindful of this deadline?
Primarily, this affects individuals with income that is not automatically subject to tax withholding. This includes self-employed professionals, independent contractors, and some freelancers.
Certain taxpayers should be especially mindful of the upcoming deadline to ensure they submit an appropriate estimated tax payment to avoid owing taxes and penalties when they file in 2024. These taxpayers include:
Those who have switched from itemizing to taking the standard deduction,
Two wage-earner households,
Employees with non-wage sources of income, such as dividends,
Those with complex tax situations, or
Those who failed to increase their tax withholding.
What income is taxable?
Most types of income are taxable. This includes not just your primary earnings but also unemployment income, refund interest, income from gig work, digital assets, part-time work, side jobs, or income from the sale of goods.
In addition, late-year financial transactions could have an unexpected tax impact. These could include year-end bonuses, holiday bonuses, stock dividends, capital gain distributions from mutual funds, stocks, bonds, virtual currency, real estate, or other property sold at a profit.
Making your estimated tax payment
The most efficient way to make an estimated tax payment is electronically. Taxpayers can use IRS Direct Pay, IRS Online Account, or the Electronic Filing Tax Payment System (EFTPS). These tools allow taxpayers to schedule payments in advance, view payment history, and track and change scheduled payments.
Taxpayers can also pay using their debit or credit cards, though card processors (not the IRS) charge a service fee for this option.
Stay on track
To avoid surprises, use tools like the Tax Withholding Estimator or the worksheet in Form 1040-ES. These resources can help you determine if a payment is necessary and calculate the appropriate amount.
The upcoming deadline of January 16th for the final 2023 quarterly estimated tax payments is fast approaching. It’s essential for taxpayers to plan ahead and ensure they’re on top of their tax obligations to avoid potential penalties or unexpected tax bills. For more information or assistance planning for quarterly estimated payments, please contact our office.
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