As tax season is in full swing, it’s important not to forget about another crucial deadline: the April 15 due date for first-quarter estimated tax payments. This particularly applies to individuals earning income from gig economy work, freelancing, small businesses, retirement, or investments, where there are no tax withholdings.
For those who expect to owe at least $1,000 in taxes, the first-quarter estimated payment for 2024 must be made by April 15. This can be a bit challenging for some taxpayers who also have federal taxes due on the same day, as pointed out by certified public accountant Tom Wheelwright, the CEO of WealthAbility.
Understanding Estimated Tax Payments
Estimated tax payments serve as a way to avoid penalties, as reminded by the IRS earlier this month. The deadlines for 2024 payments are April 15, June 17, Sept. 16, and Jan. 15, 2025. Failure to meet these deadlines may result in interest-based penalties that compound daily.
Ensuring Compliance
To determine the appropriate quarterly estimated payments, individuals can follow the IRS “safe harbor” rules. This involves paying at least 90% of the current year’s tax liability or 100% of the previous year’s taxes, whichever amount is lower. The safe harbor threshold increases to 110% if the last year’s adjusted gross income was $150,000 or higher.
How to Make Payments
Quarterly tax payments can be made conveniently through the IRS online account, providing a streamlined process for monitoring payment history and pending payments. If opting to pay by mail, sending payments through certified mail with a return receipt is recommended for proof of timely submission.
At Extreme Investor Network, we understand the significance of staying on top of your finances and meeting important deadlines like estimated tax payments. Our goal is to provide valuable insights and strategies to help individuals make informed financial decisions and achieve their investment goals. Stay informed and empowered with our expert advice and resources on personal finance and investing.
