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The estimated tax payment deadline for the fourth quarter is January 16th, and failure to pay could result in unexpected charges or penalties. I.R.S..
Many employers withhold taxes from all paychecks, but other income, such as freelance, small business, and investment income, requires separate payments to the IRS.
Generally, if you expect your 2023 tax liability to be $1,000 or more, you must make quarterly estimated payments on this income.
In December, the IRS reminded these taxpayers to pay their fourth-quarter taxes by January 16 to “avoid potential penalties and tax charges when filing their 2024 returns.” .
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“By making these payments, you won't have to pay any more to the IRS on April 15,” said Tom Wheelwright, CPA, CEO of WealthAbility.
If you miss the estimated tax deadline, you may be assessed a late fee of 0.5% (up to 25%) of the unpaid balance for the month or part of a month, plus interest. Currently 8%.
What you need to know about the “safe harbor” rule
Mark Steber, chief tax information officer at Jackson Hewitt, said filers can avoid underpayment penalties by following “safe harbor” guidelines.
Meet the requirement by paying at least 90% of the current year's tax liability or 100% of last year's tax, whichever is less.
However, if your 2022 adjusted gross income is $150,000 or more, you must pay the lesser of 90% of this year's tax liability or 110% of last year's tax to meet the 2023 safe harbor requirements . You can find your adjusted gross income at:Line 11 of Form 1040 From your 2022 tax return.
“Really good tax forecasting.” [for 2023] That's something we have to think about now,” Stever added.
How to make quarterly estimated tax payments
The bureau said that due to limited time before deadlines, the “fastest and easiest” option to transfer funds to the IRS is through electronic payments. The options are:
If you pay by mail, Wheelwright recommends sending certified mail with a return receipt, as you may “need to prove that you paid on time.”
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