IRS: Taxpayers may avoid a penalty by making a second-quarter estimated payment by June 17

Personal finance

D3sign | Moment | Getty Images

The second-quarter estimated tax deadline for 2024 is June 17, and you could owe a penalty if you don’t send a payment, according to the IRS.

You typically owe estimated tax payments for income without withholdings, such as from contract jobs, freelancing or gig economy work, or if you run a small business.

But quarterly estimated tax payments are not just for the self-employed or small business owners, experts say.

More from Personal Finance:
Biden advisor unveils tax policy plan ahead of expiring Trump tax cuts
Why maintenance and repair costs can be a surprise for first-time homeowners
Here are the ‘micro pockets’ of deflation in May 2024 — in one chart

For example, you may need a quarterly payment after a large distribution from a pretax individual retirement account or a significant profit from selling an asset, according to certified financial planner Kelly Renner at Life Strategies Financial Partners in Augusta, Georgia.

You must make quarterly estimated tax payments if you expect to have at least $1,000 in tax liability or more on your 2024 return.

For the 2024 tax year, the estimated tax deadlines are April 15, June 17, Sept. 16 and Jan. 15, 2025. If you skip these deadlines, you could trigger an interest-based penalty calculated using the current interest rate and balance due.

Avoid a penalty by meeting the ‘safe harbor’ rules

It is possible to avoid penalties for missed estimated tax payments by meeting “safe harbor rules” from the IRS, explained Sheneya Wilson, a certified public accountant and founder of Fola Financial in New York.

You meet the safe harbor rules by paying at least 90% of the current year’s tax liability or 100% of last year’s taxes, whichever is smaller.

However, that threshold climbs to 110% if your adjusted gross income from 2023 was $150,000 or higher. You can find adjusted gross income on line 11 of Form 1040 from your 2023 tax return.

While the safe harbor protects from penalties, you could still owe taxes for 2024 if you earn more than 2023 and don’t make higher estimated payments.

If you are expecting “rapid income growth” for 2024, you should work with a tax professional for a “proper tax plan and projection,” Wilson said.

How to make quarterly estimated tax payments

The “most secure, fastest and easiest way” to make estimated tax payments is online, according to the IRS.

You can use your online account, IRS Direct Pay or the U.S. Department of the Treasury’s Electronic Federal Tax Payment System, or EFTPS.

“Every taxpayer should have an account with,” which makes it easy to make payments and reconcile transactions, Wilson explained.

However, if you prefer to mail payments, experts suggest using certified mail with a return receipt for proof of an on-time payment.

Articles You May Like

What to know about airline refunds, delays as global IT outage causes ‘mass chaos,’ expert says
Alphabet moves past early stumbles in AI to deliver positive story to investors
Ford to spend $3 billion to expand large truck production to a plant previously set for EVs
Federal appeals court blocks Biden’s new student loan relief plan
The death of the personal check: As retailers move toward ‘check zero,’ here’s what that means for you

Leave a Reply

Your email address will not be published. Required fields are marked *