The second quarter estimated tax payment deadline is June 17, 2024. Taxpayers should remember this deadline to avoid falling behind on their taxes and facing possible underpayment penalties. Taxpayers should also remember that third quarter payments are due September 16, 2024, and the final estimated tax payment for tax year 2024 is due January 15, 2025.
Estimated tax payments are usually made by taxpayers who are self-employed, retirees, investors, businesses, corporations and other individuals who do not have taxes withheld.
Taxes are to be paid as income is earned during the year.
There are two ways for taxpayers to do this:
1. Withholding from pay, pension or certain government payments, such as Social Security.
2. Making quarterly estimated tax payments throughout the year.
For taxpayers where not enough taxes are being withheld from their salary, pension or other income, estimated tax payments may have to be made. Taxpayers who are employed can avoid having to make estimated tax payments by asking their employer to withhold a larger amount from their earnings by submitting a new Form W-4, Employee’s Withholding Certificate.
Who Should Pay Estimated Tax?
Taxpayers including sole proprietors, partners and S corporation shareholders must make estimated tax payments if they expect to have a tax liability of $1,000 or more when they file their return. Corporations that expect to owe tax of $500 or more, generally must make estimated tax payments.
Taxpayers earning income not subject to withholding are encouraged to consider making quarterly estimated tax payments during the year to stay current and avoid an unexpected tax bill. All income is taxable unless it is specifically excluded by tax law. Taxpayers should report any profits from selling goods or services, regardless of if they receive a Form 1099-K.
Avoiding an Underpayment Penalty
To avoid an underpayment penalty at tax time, taxpayers should pay most of their taxes during the year, owing less than a $1,000 when filing their return. Generally, for 2024 that means paying at least 90% of the tax owed on their 2024 return, or at a minimum 100% of the tax shown on their year 2023 tax return.
Exceptions to the Underpayment of Estimated Tax Penalty and special rules apply for some groups of taxpayers, such as farmers, fishermen, certain higher income taxpayers, casualty and/or disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year.
It is important to consult with a tax professional throughout the year to avoid tax underpayments and possible penalties.