IRS: Meet this Sept. 15 deadline to ‘keep away from a surprise at tax time’

Sept. 15 is quick approaching — and in the event you’re not withholding taxes out of your earnings, it is time to send a payment to the IRS.

Many employers withhold taxes from each paycheck, however freelancers, self-employed employees, small enterprise homeowners, buyers and others pay on their very own through quarterly estimated tax funds.

Typically, you need to make quarterly estimated funds in the event you’re anticipating an annual tax legal responsibility of $1,000 or extra. Last week, the IRS reminded filers that these funds can assist “keep away from a surprise at tax time.”

More from Personal Finance:
High interest rates make it possible to earn ‘real money’ on cash now
Most first-time homebuyers don’t put down 20%. How much you need
Investors should know these two risks: ‘It’s kind of like yin and yang’

“Estimated tax funds are essential for assembly tax obligations all year long, avoiding penalties and staying on high of your funds,” stated Sean Lovison, a Philadelphia-area licensed monetary planner with WJL Financial Advisors. He can also be a licensed public accountant.

It’s essential to calculate tax funds precisely, pay on time and to contemplate assembly the “secure harbor” rule to keep away from underpayment penalties, Lovison stated.

“Keep information, monitor your tax state of affairs, and search skilled steering for a easy tax expertise,” he stated.

Since the U.S. tax system is “pay-as-you-go,” you might face penalties for not staying present, stated CFP Kathleen Kenealy, founding father of Katapult Financial Planning in Woburn, Massachusetts.

If you miss any of the 4 estimated tax cost deadlines for 2023 — April 18, June 15, Sept. 15 or Jan. 16, 2024 — you will incur a late penalty of 0.5% of your unpaid steadiness per 30 days or partial month, up to 25%, plus curiosity.

However, the IRS has a “secure harbor” to keep away from underpayment penalties, Kenealy defined. You meet the necessities by paying at least 90% of the present 12 months’s tax legal responsibility or 100% of final 12 months’s taxes, whichever is smaller.

But the rule is “a little completely different for high-income taxpayers,” she stated. If your 2022 adjusted gross earnings was $150,000 or extra, you want to pay the decrease of 90% of the present 12 months’s tax legal responsibility or 110% of final 12 months’s taxes to meet the secure harbor requirement for 2023. Adjusted gross earnings could be discovered on line 11 of your 2022 tax return.

Online choices embody funds by means of your on-line account, through Direct Pay, the Electronic Federal Tax Payment System and extra. However, you will incur a charge for debit and bank card funds. You can study extra about how to make funds here.