The deadline for the fourth-quarter estimated tax payment in 2024 is approaching on Jan. 15. Missing this payment could result in penalties and fees when filing your return, according to the IRS.
Estimated taxes typically apply to income that does not have withholdings, such as earnings from freelance work, small businesses, or investments. It’s important to ensure you have paid enough taxes, even on full-time or retirement income if you didn’t withhold adequately.
You may also owe fourth-quarter taxes on bonuses, dividends, capital gains, and crypto profits. It’s crucial to pay taxes as you earn income throughout the year to avoid penalties.
One way to prevent penalties is to follow the “safe harbor” rule, where you must pay at least 90% of your 2024 tax liability or 100% of your 2023 taxes, whichever is smaller. This threshold increases to 110% if your 2023 adjusted gross income was $150,000 or higher.
Remember that you may still owe taxes for 2024 if your income exceeds expectations. Make sure to adjust your tax payments accordingly.
To make quarterly estimated tax payments, consult a CPA or tax advisor for guidance on meeting IRS requirements.