The Internal Revenue Service issued a press release reminding taxpayers who pay estimated taxes that the third quarter payment deadline is September 15, 2023.
Taxpayers who are not required to withhold may be required to make quarterly estimated tax payments. Individuals who predict a tax burden of $1,000 or more when they file their return, such as gig workers, sole proprietors, retirees, partners, and S corporation shareholders, must normally make estimated tax payments.
IRS.gov tools such as the IRS Interactive Tax Assistant, the Tax Withholding Estimator, and the worksheet in Form 1040-ES, Estimated Tax for Individuals can help taxpayers determine whether they are obligated to pay estimated taxes.
More Taxpayers to Receive 1099-Ks
Beginning in January 2024, taxpayers who were paid more than $600 via payment apps and online marketplaces or received any amount by payment card could get a Form 1099-K, Payment Card and Third Party Network Transactions, for payments made in 2023. Taxpayers with a side business, sole proprietors, and anyone offering goods and services online are included. It’s crucial to note that regardless of whether they receive a Form 1099-K or any other third-party reporting form, taxpayers must disclose their income unless it’s exempt by law. The 1099-K reporting threshold for third-party reporting has no effect on what is considered income or how taxes are calculated. More information can be found at Understanding Your Form 1099-K.
Avoid Underpayment Penalties
Taxpayers who underpay their taxes, whether through withholding or anticipated tax payments, may be subject to a penalty. Even if a refund is due when a tax return is submitted, late or missing anticipated tax payments could result in penalties.
To find out if they have incurred a penalty, taxpayers can use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts. Taxpayers can request a penalty waiver if they underpaid due to special circumstances rather than purposeful disregard.
Payment
The IRS recommends making an estimated tax payment electronically at the IRS.gov Payments website, as it is the quickest and most secure method. If preferred, taxpayers can also use IRS Direct Pay or log into their IRS Online Account to make a payment directly from their bank or savings account. Taxpayers may also use a debit card, credit card, or digital wallet to pay, but will incur a fee charged by the payment processor. Another option is to make estimated tax payments through the Electronic Federal Tax Payment System (EFTPS). Finally, payments in the form of a check or money order made payable to the “United States Treasury” are also accepted.
As a reminder, Jan. 16, 2024 is the due date for the fourth and final estimated tax payment for tax year 2023.
Read the full IRS news release (IR-2023-152) for more information. Contact your HW&Co. advisor with any questions.
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