If you are required to make quarterly estimated payments, then Tuesday April 18th is the last day to make your first quarterly payment.
Making estimated tax payments
You may have to make estimated tax payments for 2023 if you receive interest, dividends, alimony, self-employment income, capital gains or other income. If you don’t pay enough tax during the year through withholding and estimated payments, you may be liable for a tax penalty on top of the tax that’s ultimately due.
Individuals must pay 25% of their “required annual payment” by April 15, June 15, September 15, and January 15 of the following year, to avoid an underpayment penalty. If one of those dates falls on a weekend or holiday, the payment is due the next business day. For example, this year the filing deadline is April 18 for most taxpayers because April 15 falls on a Saturday and April 17 is a holiday in the District of Columbia.
The required annual payment for most individuals is the lower of 90% of the tax shown on the current year’s return or 100% of the tax shown on the return for the previous year. However, if the adjusted gross income on your previous year’s return was more than $150,000 ($75,000 if you’re married filing separately), you must pay the lower of 90% of the tax shown on the current year’s return or 110% of the tax shown on the return for the previous year.
Generally, people who receive most of their income in the form of wages satisfy these payment requirements through the tax withheld from their paychecks by their employers. Those who make estimated tax payments generally do so in four installments. After determining the required annual payment, they divide that number by four and make four equal payments by the due dates.
But you may be able to use the annualized income method to make smaller payments. This method is useful to people whose income isn’t uniform over the year, for example because they’re involved in a seasonal business.
Staying on track
Contact your Rudler, PSC advisor at 859-331-1717 if you have questions about estimated tax payments. We can help you stay on track so you aren’t liable for penalties.
RUDLER, PSC CPAs and Business Advisors
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