If you’re self-employed or make money as an independent contractor or freelancer, April 15 isn’t the only tax-related date that should be on your calendar. You Needed Tax payments are due four times a year – once per quarter – and one of those deadlines is coming up on January 16.Thank you for reading this post, don't forget to subscribe!
The IRS collects estimated quarterly taxes from people who earn income on Form 1099 (as opposed to W-2, which is a classification for employees) and who expect to owe $1,000 or more to the government for the year. . These payments are due four times annually, although they are not evenly spaced by quarter.
The final payment for the 2023 tax year is Tuesday, Jan. 16. Here’s how to determine if you need to pay your bill and how to do so.
How do estimated tax payments work?
People who earn income on Form 1099, such as freelancers, independent contractors and self-employed individuals, do not have any taxes withheld from their pay, and instead they are responsible for paying the taxes directly to the IRS. Some W-2 earners may also have to make estimated payments if too little is withheld, as are some landlords, investors and businesses.
These payments are due at least quarterly, although you can make smaller payments more often if you prefer, and they cover the income earned during that quarter. In 2024, the timeline is as follows:
Jan. 16 For income earned Sept. 1-Dec. 31, 2023
April 15 for income earned from January 1 to March 31, 2024
June 17 for income earned from April 1 to May 31, 2024
September 16 for income earned June 1-August. 31, 2024
If you earn enough income to pay taxes in a quarter, you must make estimated payments or risk underpayment penalties.
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 your total owed and how much you paid in taxes last year. . Then, 2023 Q4 payments are due on January 16 this year.
Technically, estimated payments are due as income is earned, so if you haven’t made any payments for the quarters in which you earned untaxed income, you may be penalized, and you may have to pay quarterly payments this year. One should plan ahead by setting aside money for this. To avoid underpayment penalties, your best bet is to aim for 100% of what you paid last year, or 110% if you make more than $150,000.
You can estimate your quarterly payments by using last year’s tax bill and dividing by four (if you think your income will be the same and consistent across all quarters) or by annualizing using the IRS’s tax worksheets (more Accurate if your income fluctuates greatly throughout the year). Taxes can be complicated for 1099 earners, so it may be worth working with a professional.
You should have a good idea of how much you’ve been paid, as well as deductible expenses and how much you’ve contributed to HSAs and IRAs. To prepare for tax season, you should keep careful track of this income and expenses in advance. As a reminder, you must pay taxes on all income, even if you don’t receive a 1099 for every 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, enrolling in the Electronic Federal Tax Payment System (EFTPS), or using the IRS2Go app. Are. Otherwise, you can pay through credit or debit card or digital wallet (with processing fee) or bank transfer (direct pay).