Don’t Miss This Deadline for Estimated Quarterly Tax Payments
If you’re self-employed or make money as an independent contractor or freelancer, April 15 isn’t the only tax-related date you need to have on your calendar. You must make tax payments four times a year—once a quarter—and one of those due dates is January 16th.
The IRS collects estimated quarterly taxes from those who earn income on Form 1099 (as opposed to W-2, which is an employee classification) and who expect to owe the government $1,000 or more for the year. These payments are made four times a year, although they are not distributed evenly across quarters.
The final payment for tax year 2023 will be on Tuesday, January 16th. Here’s how to determine if you need to pay your bill and how to do it.
How do estimated tax payments work?
Those who earn 1099 income, such as freelancers, independent contractors, and self-employed individuals, do not have any taxes withheld from their paychecks and are instead responsible for paying the IRS directly. Some W-2 recipients may also have to make estimated payments if the amount withheld is too small, as some landlords, investors and businesses do.
These payments are made at least quarterly, although you can make more frequent, smaller payments if you wish, and they cover the income earned during that quarter. In 2024 the deadlines are as follows:
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January 16 for income received from September 1 to December. 31, 2023
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April 15 for income received from January 1 to March 31, 2024.
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June 17 for income received from April 1 to May 31, 2024.
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September 16 for income received from June 1 to August. 31, 2024
If you earn enough income in a quarter to pay your taxes, you must make an estimated payment or risk an underpayment penalty.
How do I pay estimated taxes?
If you expect to owe $1,000 or more in taxes this tax season, you should consider making estimated tax payments, although there may be exceptions depending on the total amount you owe and the amount you’ve paid in taxes in the past year. Again, payments for the fourth quarter of 2023 are due on January 16th of this year.
Technically, estimated payments are due as you earn income, so if you haven’t made any payments for quarters in which you earned tax-free income, you could be penalized and should plan ahead by setting aside money for quarterly payments this year. To avoid an underpayment penalty, it’s best to aim for 100% of what you paid the previous year, or 110% if you earn more than $150,000.
You can estimate your quarterly payment by using last year’s tax bill and dividing it by four (if you think your income will be roughly the same and constant across the quarters) or by calculating your annual income using the IRS tax table (more accurately if your income fluctuates greatly). during a year). Taxes for 1099 recipients can be complicated, so it may make sense to work with a professional.
You’ll need a good idea of how much you were paid, as well as your deductible expenses and the amount you contributed to your HSA and IRA. To prepare for tax season , you should already be closely tracking these income and expenses. As a reminder, you must pay taxes on all income, even if you do not receive a 1099 for each client or employer.
When you’re ready to make (or schedule) your estimated tax payment, you can do so online by logging into your IRS Online account, registering for Electronic Federal Tax Payment System (EFTPS), or using the IRS2Go app. Otherwise, you can pay by credit or debit card, digital wallet (with processing fee), or bank transfer (direct payment).