When it comes to managing your finances as a self-employed individual or small business owner, staying on top of your estimated tax payments is crucial. The second-quarter estimated tax deadline for 2024 is on June 17, and failing to make a payment by this date could result in a penalty from the IRS. It is essential to remember that estimated tax payments are not just for the self-employed or small business owners; they are also necessary for individuals who receive income without withholdings, such as from contract jobs, freelancing, gig economy work, or large distributions from retirement accounts.
For the 2024 tax year, the estimated tax deadlines are as follows: April 15, June 17, Sept. 16, and Jan. 15, 2025. To avoid penalties for missed estimated tax payments, it is crucial to meet the “safe harbor rules” set by the IRS. These rules require taxpayers to pay at least 90% of the current year’s tax liability or 100% of the previous year’s taxes, whichever is smaller. However, if your adjusted gross income from 2023 was $150,000 or higher, the threshold climbs to 110%.
If you anticipate rapid income growth for 2024, it is advisable to work with a tax professional to create a proper tax plan and projection. This will help you avoid unexpected tax liabilities and penalties for underpayment. A tax professional can also provide guidance on making higher estimated payments if your income is expected to increase significantly in the current tax year.
The most secure, fastest, and easiest way to make estimated tax payments is through online methods approved by the IRS. You can use your online account, IRS Direct Pay, or the Electronic Federal Tax Payment System (EFTPS) provided by the U.S. Department of the Treasury. Having an account with IRS.gov makes it convenient to make payments, reconcile transactions, and stay compliant with tax obligations.
If you prefer to mail your estimated tax payments, experts recommend using certified mail with a return receipt. This will provide you with proof of an on-time payment and ensure that your payment is received by the IRS within the specified deadline. It is essential to keep accurate records of your payments to avoid any discrepancies or penalties.
Staying compliant with estimated tax payments is crucial for self-employed individuals, small business owners, and individuals with income without withholdings. By understanding the importance of second-quarter estimated tax deadlines and meeting the safe harbor rules set by the IRS, you can avoid penalties and ensure that you are on track with your tax obligations. Working with a tax professional and utilizing online payment methods recommended by the IRS can help simplify the process of making estimated tax payments and staying current with your tax liabilities.