IRS: Meet this Sept. 15 deadline to ‘avoid a surprise at tax time’

0
91

Artistgndphotography | E+ | Getty Images

Sept. 15 is fast approaching — and if you’re not withholding taxes from your income, it’s time to send a payment to the IRS.

While many employers withhold taxes from every paycheck, freelancers, self-employed workers, small business owners, investors and others pay on their own via quarterly estimated tax payments.

Typically, you must make quarterly estimated payments if you’re expecting an annual tax liability of $1,000 or more. The IRS reminded filers last week that making quarterly estimated payments could help them “avoid surprises at tax time”. The IRS reminded filers last week that these payments can help “avoid a surprise at tax time. How much you need

Investors should know these two risks: ‘It’s kind of like yin and yang’
“Estimated tax payments are crucial for meeting tax obligations throughout the year, avoiding penalties and staying on top of your finances,” said Sean Lovison, a Philadelphia-area certified financial planner with WJL Financial Advisors. He is also a certified public accountant.
It’s important to calculate tax payments accurately, pay on time and to consider meeting the “safe harbor” rule to avoid underpayment penalties, Lovison said.
“Keep records, monitor your tax situation, and seek professional guidance for a smooth tax experience,” he said.

Meet the ‘safe harbor’ requirements

Since the U.S. tax system is “pay-as-you-go,” you may face penalties for not staying current, said CFP Kathleen Kenealy, founder of Katapult Financial Planning in Woburn, Massachusetts.

If you miss any of the four estimated tax payment deadlines for 2023 — April 18, June 15, Sept. 15 or Jan. 16, 2024 — you’ll incur a late penalty of 0.5% of your unpaid balance per month or partial month, up to 25%, plus interest.

However, the IRS has a “safe harbor” to avoid underpayment penalties, Kenealy explained. The IRS has a “safe harbor” to avoid underpayment penalties. Kenealy explained. If your adjusted gross income in 2022 is $150,000 or higher, you must pay either the lower of 90 percent of the current tax liability for the year or 110% last year’s taxes. Line 11 of your tax return for 2022 shows the adjusted gross income. )

How to make estimated tax payments

Electronic payments are the “easiest, fastest and most secure” option for estimated tax payments, according to the IRS.

Online options include payments through your online account, via Direct Pay, the Electronic Federal Tax Payment System and more. You’ll be charged a fee if you use debit or credit cards. Learn more about making payments by clicking here.