Third Estimated Tax Payment Due Sept.16, Extensions for Disaster-Area Taxpayers

The Internal Revenue Service today reminded the taxpayers that the third quarter estimated tax for 2024 is due on September 16, 2024.

The IRS also once again informed the taxpayers of 17 states—Puerto Rico and the Virgin Islands—who were affected by disasters that they might be eligible for an automatic extension of the tax-payment time. Schedules are different depending upon the type of disaster and place.

Individuals are required to make tax payments over the calendar year either by wage withholding or by making estimated tax payments each time they received income. Freelance business individuals, those involved in gig economy, retirees, partners of a partnership, and S corporation shareholders are some of the taxpayers that should make estimated tax payments if they think they will have a tax liability of equal to or more than $1,000 at the time of filing of the return.

A general rule of thumb is that taxpayers should make estimated tax payments if they expect:

• That they have to owe the IRS at least $1,000 in taxes for 2024, after taking into account their withholding and the tax credits allowed to them.
• Their withholding and tax credits to be less than the smaller of:
  • either 90% of the tax to be reckoned on the tax year 2024 or
  • 100% of the tax shown on their complete 12-month 2023 tax return.

Figuring estimated tax

To determine his/her estimated tax, the taxpayer comes up with his/her estimated adjusted gross income, taxable income, his taxes, as well as his deductions and credits of the year. Based on this, possibly the best approach could be to use 2023 as a reference to determine the estimated tax to be paid in figure 2024.

The tools on IRS enable taxpayers to… Instead of directly going to www.irs.gov and seeking to know if they have to deposit estimated taxes. The Tax Withholding Estimator, the IRS Interactive Tax Assistant and the worksheet in Form 1040-ES estimate tax for individuals are self-explanatory and have well-outlined procedures.

Payment options

According to the IRS, any individual receiving income that normally does not undergo withholding or a portion of which does can consider making the estimated tax payments periodically to avoid a shock in the coming tax season.

An electronic payment is the most convenient, efficient and safe means through which one can be able to make an estimated tax payment. On the Payments page, among all the sections in IRS.gov, they can get the complete details about the tax payment including how and when to pay the taxes, the available methods of payment and so on.

Traditional forms of payment that taxpayers use include IRS Online Account or IRS Direct Pay, where the taxpayer submits payment from a checking or savings account securely. Another option of payment made available to the taxpayers includes debit card, credit card or digital wallet payment.

Direct Pay and the pay by debit card, credit card or digital wallet options are payable online at IRS. It allows people to make payments through the website of the Internal Revenue Service under the web address www.gov/payments and through the IRS2Go App. Debit and credit card payments should be advised that though the convenience fee to pay through debit and credit cards is charged to the taxpayers, the actual charge is made by the payment processor, not the IRS.

One way through which a taxpayer can make an estimated tax payment is through the EFTPS, which is an Electronic Federal Tax Payment System. Another form of payment that is acceptable on this program to pay for the fees is through a check or money order through the United States Treasury.

Avoid a penalty for underpayment

A penalty might be due if taxpayers underpaid their tax obligations, whether through withholding or payment through estimated tax. It is also important to note that a taxpayer will be subjected to penalties for late or skipped estimated tax payments even if he or she is anticipating a refund when e-filing a tax return.

To find out if a taxpayer owes a penalty, he or she should fill out Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts. They may also seek an exemption of the penalty if they have underestimated their taxes due to circumstances beyond their comprehension and not with intention of evasion.

Some of the important provisions regarding taxpayers include the farmers, fishermen, those who suffered a loss due to a casualty or a disaster, disabled persons, the retirees and those who receive income erratically throughout the year.

Disaster-area taxpayers get more time

Basically, any ordinary citizen who resides or conducts business in a locality that has been deemed a disaster area is automatically entitled to an extension in the time within which they are allowed to pay their taxes. They differ depending on the type of disaster as well as the area of an occurrence. Currently:

• The taxpayers in parts of Arkansas, Iowa, Mississippi, New Mexico, Oklahoma, Texas and West Virginia have till November 1, 2024, to remit the estimated tax payment and
• The remaining taxpayers in all or parts of Florida, Georgia, Kentucky, Minnesota, Missouri, North Carolina, Puerto Rico, South Carolina, South Dakota, Texas, Vermont and the Virgin Islands need to pay the said estimated tax payment on or before February 3, 2025.

Other details of the relief occur under the section Around the Nation on the IRS site..

1099-Ks for payments received in 2024

Any person that was paid through payment apps, online marketplaces, or received any payment through payment cards could receive a Form 1099-K, Payment Card and Third Party Network Transactions, for the payments made in 2024. This entails any person with a ‘side job,’ freelancers, self-employed individuals, and people who sell their products and services over the internet.

Everyone must file returns based on their gross receipts unless it is prohibited to do so by the law, whether or not they received a 1099-K form or any other form of a third-party’s report. Thus, third-party reporting identified at the reporting threshold of $1099 K does not alter the nature of what income is or the formula used to calculate it. Further details can be found at the following: Understanding Your Form 1099-K.

Tax payers using this method are supposed to make the fourth and last estimated tax payment for the fiscal year 2024 on January 15, 2025.

FAQs