Just a quick reminder to all self-employed workers, businesses, and estimated tax filers: We are a week away from the Aprile 15 deadline for 2024 Q1 estimated tax payments. This includes many corporations, retirees, high income wage earners and expatriates who are required to “pay-as-you-go.”
US taxpayers are required to pay taxes as income is earned throughout the year, and not just in one lump sum on the date of the tax return. Many US taxpayers ensure there is enough withheld from the wages and earnings to cover associated taxes. Other US taxpayers need to make quarterly estimated tax payments throughout each tax year to meet the “pay-as-you-go” requirements of US tax law.
Note: there is a substantial amount of interest as well as a penalty for underpayment of tax by individuals or corporations.
The general “best practices” guideline is to make estimated quarterly payments if you are self-employed, a gig worker, speculator, investor, a business or corporation, or a US taxpayer who generates substantial income representing capital gains that are not subject to additional income tax withholding. The IRS notes in recent news release IR-2024-95 the requirement to make additional estimated tax payments applies to those with part-time work, side jobs, as well as any type of income “commonly reported on Form 1099-K.”
Have you received any income from spousal support (alimony), rental income, interest payments, dividends, or other sources of income outside of your work as a W2 wage earner? If so, you should consult your tax attorney or tax professional regarding requirements to file an IRS Form 1040-ES, “Estimated Tax for Individuals.” The IRS further recommends Publication 505, “Tax Withholding and Estimated Tax,” that provides a substantial explanation of the types of income that require estimated tax payments as well as the process to complete these forms or electronic submissions.
US expatriates are fully required to file tax returns and pay estimated taxes in the same manner as US taxpayers who reside within the US.
The estimated tax deadline has been extended to June 17, 2024 for qualifying US taxpayers who have suffered from recent disasters in California, Connecticut, Michigan, Tennessee, Washington and West Virginia. Some eligible US taxpayers from Alaska, Maine and Rhode Island have been given an extension to July 15, and those eligible US taxpayers who suffered from the fires and disasters in Hawaii have been given an extension to August 7, 2024. Qualifying US taxpayers who live or have business interests in the middle east war zones of Israel, Gaza or the West Bank have been given an extension to October 7.
There are special considerations under US tax law for those receive irregular income such as farmers and fishers, those who have disabilities as well as many recent retirees.
The bottom line for all self-employed workers, businesses, and estimated tax filers and those who have generated income outside of standard wage tax withholding: If you’ve made money and no taxes were withheld at the time you earned it, you in all likelihood need to make an estimated tax payment. It is the responsibility of US taxpayers to understand their responsibilities under the law. Substantial penalties and interest await those who fail to make required estimated income tax payments.
If you have questions about whether or not to make estimated tax payments to the IRS, or any other tax-related issue we invite you to learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470.