The Internal Revenue Service (IRS) has reminded taxpayers, particularly those who didn’t pay enough tax throughout 2023, to make their fourth quarter tax payment by January 16. This step is crucial to avoid potential penalties or tax bills when filing in 2024. This reminder is especially pertinent for small business owners, self-employed individuals, and independent contractors.
Who Needs to Make a Payment?
- Self-Employed and Independent Contractors: Those earning income not subject to withholding should pay taxes quarterly.
- Individuals with Complex Tax Situations: This includes those who previously itemized deductions but now take the standard deduction, households with dual incomes, and those with non-wage income sources.
Understanding Taxable Income
- Broad Income Spectrum: The IRS emphasizes that most income, including unemployment benefits, dividends, and gig economy earnings, is taxable.
- Year-End Financial Transactions: Activities like receiving bonuses, lottery winnings, or profits from sales of stocks or property can impact tax obligations.
Delay in Requirement for Forms 1099-K
- Transition Year for Reporting Threshold: For 2023, the threshold for issuing Forms 1099-K remains at transactions exceeding $20,000 with more than 200 transactions.
How to Make an Estimated Tax Payment
- Electronic Payment Options: Taxpayers can use IRS Direct Pay, IRS Online Account, or the Electronic Filing Tax Payment System (EFTPS).
- Debit or Credit Card Payments: These are accepted, but the card processors charge a service fee.
Tools for Estimating Taxes
- Tax Withholding Estimator: Available on IRS.gov, it assists taxpayers in determining if they need to make an estimated tax payment and the correct withholding amount.
- Form 1040-ES and Publication 505: These resources help calculate estimated taxes.
Planning Ahead for Tax Season
The IRS encourages taxpayers to prepare early for tax-filing season. Resources like the Get Ready and Estimated Tax FAQs pages on IRS.gov offer valuable information and tips.
This reminder from the IRS is a critical alert for taxpayers, especially those in flexible employment situations or with varied income sources, to stay compliant and avoid penalties. By making their estimated tax payments by January 16, taxpayers can ensure they are meeting their obligations and avoid surprises during the tax filing season.
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This article, "IRS Highlights Jan. 16 Deadline for Final 2023 Quarterly Estimated Tax Payments" was first published on Small Business Trends