As the second quarter comes to an end, it’s important to keep an eye on a key date: June 17, the IRS deadline for the second quarter estimated tax payment. If your income isn’t subject to withholding, such as earnings from self-employment or investments, you must pay on time. Otherwise, you could face penalties and a significant tax bill when you file your return.
Who Needs to Make Estimated Tax Payments?
If your income isn’t automatically taxed, you need to make estimated tax payments. This requirement applies to self-employed individuals, retirees, investors, and business owners. Specifically, if you expect to owe $1,000 or more when filing your return, you must make these payments.
Similarly, corporations must also pay estimated taxes. If a corporation expects to owe $500 or more, it must make payments.
To help determine if you need to pay, the IRS offers tools like the IRS Interactive Tax Assistant. Additionally, you can use the worksheet in Form 1040-ES, Estimated Tax for Individuals for further guidance.
The Importance of Estimated Tax Payments
The U.S. tax system operates on a pay-as-you-go basis. Therefore, you should pay taxes as you earn income, rather than waiting until the end of the year. If your income comes from self-employment, investments, or a side job, you need to make quarterly estimated tax payments. This approach helps you avoid penalties and interest charges.
For those who have a regular job but do not have enough tax withheld, submitting Form W-4 to adjust your withholding is another option.
Understanding Disaster Tax Relief
If you live in an area affected by a disaster, you might qualify for disaster tax relief. This relief can include postponed filing and payment deadlines. To stay informed, the IRS regularly updates its website with information on disaster relief. Therefore, check to see if your area qualifies for any extensions or special rules.
How to Make Estimated Tax Payments
Fortunately, making your estimated tax payments is straightforward with several available options:
Electronic Payment Options
The IRS offers fast, secure methods like IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), and the IRS2Go app. You can pay directly from your checking or savings account. Moreover, credit and debit cards are also accepted, though fees may apply.
Paying by Check or Money Order
Alternatively, you can send payments by check or money order, payable to the “United States Treasury,” along with a payment voucher.
Corporations, on the other hand, must make all federal tax deposits, including estimated tax payments, electronically through EFTPS.
How to Avoid Underpayment Penalties
To avoid the IRS underpayment penalty, it’s crucial to pay most of your taxes during the year. Aim to owe less than $1,000 when filing your return. For 2024, this means paying at least 90% of the tax you’ll owe or 100% of the tax shown on your 2023 return.
However, some taxpayers, like farmers, fishermen, disaster victims, and recent retirees, qualify for exceptions and special rules.
Stay Informed with IRS Resources
Managing your tax obligations can be challenging. However, the IRS offers several tools to help. For example, the Tax Withholding Estimator ensures that you’re withholding the right amount of tax from your paychecks or other income. This precaution helps you avoid underpayment penalties.
By staying on top of your estimated tax payments, you can avoid penalties and ensure that you meet your tax obligations. With the June 17 deadline approaching, it’s time to take action and stay compliant.
Conclusion
In conclusion, paying your estimated taxes on time is essential to avoid penalties. Whether you’re self-employed, a business owner, or earning income from investments, staying informed and making timely payments is key. Therefore, use IRS resources to navigate your tax obligations and stay compliant.
For more information, visit the IRS website or consult a tax professional. Don’t let the June 17 deadline catch you off guard. Instead, plan ahead and stay on top of your estimated tax payments to avoid stress and penalties.