The Internal Revenue Service today encouraged taxpayers who paid very little tax in 2024 to make an estimated fourth-quarter tax payment by January 15, 2025.
Income taxes are paid on an earned basis , meaning taxpayers must pay most of their taxes during the year in which their income is earned or received. This is typically done by having taxes withheld from paychecks or by making quarterly estimated tax payments to the IRS (or through a combination of both).
However, taxpayers who pay quarterly sometimes overlook this step, and missing a quarterly payment can result in unexpected penalties and fees when they file their returns in 2025.
Who should make a payment?
Taxpayers who earn or receive income that is not subject to tax withholding , such as self-employed individuals or independent contractors, must pay their taxes quarterly to the IRS.
Taxpayers who owed tax on their most recent return may find they owe again when they file next year and should consider making an estimated quarterly payment to avoid a potential tax bill or penalty.
Taxpayers in this situation typically include:
Those who itemized their taxes in the past, but are now taking the standard deduction.
Two households with wage earners.
Employees with non-wage sources of income, such as dividends.
Those with complex tax situations.
Those who did not increase their tax withholding.
What is taxable?
The IRS reminds people that most income is taxable. This includes unemployment income, refund interest, and income from the sharing economy and digital assets , such as cryptocurrencies and non-fungible tokens (NFTs). When calculating quarterly tax payments, taxpayers must include all forms of earned income, including income from part-time work, side jobs, or the sale of property.
In addition, various financial transactions, especially at the end of the year, can have an unexpected tax impact. Call us for help! masterstaxusa.com
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