IRS issues a crucial reminder for 2023's final quarterly tax payment
The IRS has recently issued a reminder for taxpayers, particularly those with income not subject to regular withholding, about the upcoming deadline for the final quarterly estimated tax payment for 2023.
This payment, due by January 16, 2024, is critical to avoid potential penalties or a larger tax bill during the 2024 filing season.
Who needs to make this payment?
1. Self-employed and independent contractors
Individuals who are self-employed or work as independent contractors are primarily affected by this reminder.
Since their income isn't subject to withholding, they are responsible for making these quarterly payments.
2. Taxpayers with a history of owing taxes
Additionally, those who owed taxes in the previous year are likely to find themselves in a similar situation.
This group includes:
- Households with dual incomes.
- Employees with additional income sources like dividends.
- Those with complex tax situations.
- Individuals who have transitioned from itemizing deductions to taking the standard deduction.
Understanding taxable income
Broad spectrum of taxable income
The IRS emphasizes that most forms of income are taxable.
- Unemployment benefits.
- Interest from refunds.
- Earnings from gig economy activities.
- Digital asset transactions.
- Financial gains such as bonuses, lottery winnings, and profits from asset sales.
Delay in form 1099-K requirements
A transitional year for reporting thresholds
The IRS has announced that 2023 will serve as a transitional year for the reduced reporting threshold of $600 for third-party platform payments.
For this year, the threshold for issuing Forms 1099-K remains at transactions exceeding $20,000 and more than 200 transactions.
A new threshold of $5,000 is planned for 2024.
How to make an estimated tax payment
Electronic payment options. The IRS advocates for electronic payments as the most efficient method.
Available options include:
- IRS Direct Pay for scheduling payments.
- IRS Online Account for viewing payment history and other tax information.
- Electronic Filing Tax Payment System (EFTPS) for advanced scheduling and tracking.
- Debit or credit card payments, with a service fee charged by card processors.
Tax withholding estimator - a tool for accurate calculations
Taxpayers are encouraged to use the Tax Withholding Estimator available on the IRS website. This tool helps in determining the necessity of making an estimated tax payment and assists in calculating the correct withholding amount.
Preparing for the tax-filing season
Resources for readiness. To get ready for the tax-filing season, taxpayers can visit the IRS website for helpful tips and resources, including the Get Ready and Estimated Tax FAQs pages.
This reminder from the IRS is a crucial alert for taxpayers to stay on top of their tax obligations and avoid penalties. Understanding and adhering to these guidelines is essential for a smooth tax filing experience.