Jan. 16 due date for final 2023 quarterly estimated tax payments
As we approach the end of the year, it's that time when tax preparers play a crucial role in ensuring a smooth transition for their clients into the upcoming tax season. The Internal Revenue Service (IRS) has sent out a reminder, encouraging taxpayers who might have underpaid their taxes in 2023 to consider making a fourth-quarter tax payment on or before January 16, 2024. This small step can go a long way in preventing potential penalties or unwelcome tax surprises when filing in the new year.
Throughout the year, taxes are typically managed through various means, such as paycheck withholdings, quarterly estimated tax payments, or a combination of both. This ensures that taxpayers fulfill their tax obligations as income is earned or received.
Who should consider making a payment?
For those earning income not subject to tax withholding—think self-employed individuals or independent contractors—it's advisable to make quarterly tax payments to the IRS. Additionally, individuals who found themselves owing taxes when filing their current year's tax return often face a similar situation the following year.
This group includes those transitioning from:
itemized deductions to the standard deduction
employees with non-wage sources of income
individuals with complex tax situations
those who may have overlooked adjusting their tax withholding
Understanding Taxable Income
It's crucial to remember that most income is taxable, encompassing unemployment income, refund interest, and income from the gig economy and digital assets. When estimating quarterly tax payments, it's essential to include all forms of earned income, whether from part-time work, side jobs, or the sale of goods.
Updates on Forms 1099-K Reporting Threshold
In response to feedback, the IRS has designated calendar year 2023 as another transition year for the reduced reporting threshold of $600 for Forms 1099-K. This means that third-party settlement organizations issuing Forms 1099-K are only required to report transactions exceeding $20,000 with more than 200 transactions.
Making Estimated Tax Payments
To streamline the process, the IRS encourages the use of electronic methods for estimated tax payments such as:
Taxpayers also have the option to pay with a debit or credit card, with fees applied by card processors, not the IRS.