Mark Your Calendars: Final Deadline for 2023 Estimated Tax Payments Approaching

With the deadline for estimated taxes approaching, it is essential to understand the process and avoid financial penalties. If you earn income from freelance work or a side hustle, own a business, or have unwithheld income like dividends or rental income, you likely need to pay quarterly estimated taxes to the IRS to avoid a hefty tax bill on the tax filing deadline. Not paying estimated taxes can also lead to self-employment penalties.

The quarterly estimated tax payments are typically due on the 15th of April, June, September, and January, although the deadline may vary in case of holidays or weekends. If you expect to owe $1,000 or more in taxes, you will likely need to make the estimated tax payments. Other sources of income subject to estimated taxes include investment earnings, royalties, alimony, rental income, and unemployment or retirement benefits. Even full-time employees might need to pay estimated taxes if their employer isn’t withholding enough money from their paycheck.

Estimating your quarterly tax payments can be done in multiple ways, depending on your income and deductions. If you earn a steady income, you can estimate the tax you’ll owe for the year and send 25% to the IRS each quarter. You may also need to calculate self-employment taxes if applicable. If your income fluctuates, you can estimate your tax burden based on your previous quarter’s earnings and deductions. The IRS Estimated Tax Worksheet can help with these calculations. The 1040-ES form can be used to apply for refunds or to calculate underpayments.

When filing your estimated taxes, you need to use 1040-ES form if you’re filing as an individual or a sole proprietor, or 1120-W form for corporations. Federal taxes can be paid by mail or online through the IRS website. In case of state taxes, you may need to consult your state’s department of revenue website or tax adviser. Missing the estimated tax deadlines can result in late penalties, which can be avoided through a waiver in certain circumstances.

If you earn $400 or less in net earnings for the quarter, you don’t have to pay estimated taxes, but you must file a tax return even if no taxes are due. US citizens or residents needing to pay estimated taxes can explore annualized income installments. For a more comprehensive understanding of estimated taxes, including how they differ for freelance workers, you can refer to tax form 1099-K and other tax resources. Making sure to estimate and pay your taxes correctly can save you from the stress and financial burden of a lump-sum bill at tax time.


Hot News