IRS Alert: Estimated Tax Payments for 3rd Quarter Due on Sept. 16

The IRS building in Washington on Oct. 16, 2023. Madalina Vasiliu/The Epoch Times

The IRS alerted taxpayers about estimated tax payments due in the coming days, warning that underpayments can result in penalties.

The deadline for making third-quarter estimated tax payments is Sept. 16, according to a recent statement.

“Taxes must be paid as income is earned or received during the year, either through withholding or estimated tax payments,“ the statement reads. ”Taxpayers such as gig workers, sole proprietors, retirees, partners, and S corporation shareholders generally should make estimated tax payments if they expect to have a tax liability of $1,000 or more when they file their return.”

The Sept. 16 deadline is not applicable to taxpayers who work, live, or have a business in a disaster region. These individuals automatically qualify for a delayed deadline.

Individuals from parts of Arkansas, Iowa, Mississippi, New Mexico, Oklahoma, Texas, and West Virginia have a deadline of Nov. 1 to make estimated tax payments for the quarter.

For eligible taxpayers from Florida, Georgia, Kentucky, Minnesota, Missouri, North Carolina, Puerto Rico, South Carolina, South Dakota, Texas, Vermont, and the Virgin Islands, that deadline is Feb. 3, 2025.

Taxpayers who underpay estimated taxes will have to pay penalties. Penalties are imposed at a rate of 0.5 percent of unpaid taxes for every month that the payment remains due. The maximum penalty levied is 25 percent of unpaid taxes.

Individuals who delay the filing of taxes will be charged additional penalties. In these cases, the penalty is 5 percent of unpaid taxes per month until the time that the return is filed, subject to a maximum of 25 percent of the unpaid taxes.

A taxpayer who underpaid taxes because of unusual circumstances rather than willful neglect can seek a penalty waiver.

“Special rules apply to some groups of taxpayers such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees, and those who receive income unevenly during the year,” the IRS noted.

Paying Tax Obligations

In order to meet estimated tax payment obligations, taxpayers should generally pay at least 90 percent of the taxes owed on their 2024 returns, or a minimum of 100 percent of their 2023 taxes.

For employed individuals, the taxes withheld from their paychecks could be enough to meet obligations. In some cases, the employer may not withhold adequate taxes, and employees are deemed to have underpaid estimated taxes, which makes them subject to penalties.

To avoid this, taxpayers can use the IRS’s Tax Withholding Estimator to calculate the appropriate amount that employers should withhold from their paychecks. Taxpayers need to have information from their pay stubs and other income details as well as their most recent tax form for using the tool.

The IRS has another tool that people can use to gauge whether they are required to make estimated tax payments.

Payments can be made online via an IRS online account or by using IRS Direct Pay. Acceptable payment methods include via checking or savings accounts, debit cards, credit cards, and digital wallets.

“An electronic payment is the easiest, fastest, and most secure way to make an estimated tax payment,” the IRS stated.

If a taxpayer is not in a position to pay taxes in full on time, he or she can pay what is affordable while applying for a payment plan. If the application is approved by the IRS, the balance can be paid in monthly installments.

The agency also reminded those who received money via payment apps, online marketplaces, or payment cards that they may receive Form 1099-K for the transactions. This includes people involved in the sale of goods and services online.

“Taxpayers must report their income, unless it’s excluded by law, regardless of whether they receive a Form 1099-K or any other third-party reporting document,“ the IRS stated. ”The 1099-K reporting threshold for third-party reporting doesn’t change what counts as income or how tax is calculated.”