Understanding IRS Estimated Tax Payments for 2024

n the U.S., taxpayers often need to pay estimated taxes throughout the year if they don’t have enough tax withheld from income sources like self-employment, investments, or other earnings. This system ensures you pay taxes as you earn income, avoiding penalties at the end of the year.

📌Who Should Pay Estimated Taxes?

You should make estimated tax payments if:
• You expect to owe at least $1,000 in taxes after subtracting withholdings and credits.
• Your tax withholding is less than 90% of the tax for 2024 or 100% of the previous year’s tax (110% for higher incomes in excess of $150,000)

Examples of taxpayers:
• Self-employed individuals
• Freelancers, contractors
• Investors earning capital gains
• Farmers and fishermen (special rules apply)

⏳Payment Deadlines for 2024

Estimated taxes are paid quarterly:
1. 1st Quarter: April 15, 2024
2. 2nd Quarter: June 17, 2024
3. 3rd Quarter: September 16, 2024
4. 4th Quarter: January 15, 2025

If the due date falls on a weekend or holiday, it shifts to the next business day.

📌Special Rules for Farmers and Fishermen🧑‍🌾

Farmers and fishermen qualify for reduced payment requirements if at least 2/3 of their annual income comes from farming or fishing.
• One Payment Rule: Instead of paying quarterly, they can file a single estimated payment by January 15, 2025.
• Alternatively, they can file their full return and pay any tax owed by March 1, 2025, to avoid penalties.

Example:
• John, a fisherman, earns 70% of his income from fishing. He can skip the quarterly payments and pay his full tax amount when he files by March 1, 2025.

📌How to Calculate Estimated Tax
1. Estimate your total income, deductions, and credits for the year.
2. Use Form 1040-ES to calculate your tax liability.
3. Subtract taxes already paid or withheld.
4. Divide the remaining amount into four equal payments.

Example:
• Sarah is a freelancer and expects to earn $80,000 in 2024. Her estimated tax liability is $12,000 after accounting for deductions and credits.
• Quarterly payments = $12,000 ÷ 4 = $3,000 per quarter.

📌How to Pay
• Online: IRS Direct Pay, IRS2Go App, or EFTPS
• Mail: By check with a completed payment voucher from Form 1040-ES
• Automatic withdrawals

⚠️Penalties for Not Paying

If you miss deadlines or underpay, the IRS may impose penalties. Avoid this by:
• Paying at least 90% of your 2024 tax or 100% of your 2023 tax.

Summary:
Estimated tax payments ensure compliance with the IRS “pay-as-you-go” system. Farmers and fishermen benefit from special provisions. Plan ahead, calculate carefully, and pay on time to avoid penalties.