Time Is Running Out: Estimated Tax Payment for the End of 2023 Is Due Tonight

The U.S. tax system operates on a “pay as you go” system, which means you’re expected to pay federal income taxes periodically as you earn income. Traditional employees (those who receive a W-2 form) have the necessary taxes withheld from each paycheck. But for any other taxable income you receive that isn’t subject to withholding, you’re responsible for making “quarterly” estimated tax payments to satisfy the periodic payment requirement (they’re not exactly due every quarter … but it’s close enough). So, if you were self-employed last year; received dividends, interest, or other types of non-wage income in 2023; or failed to have taxes withheld from unemployment compensation, Social Security benefits, or traditional IRA distributions, then you might have to make an estimated tax payment to the IRS. If you miss the deadline or don’t pay enough, you could be hit with some serious penalties. You’ll have to pay interest on any underpayment, too. So you don’t want to miss an estimated tax payment. Related: 10 Worst IRS Problems Taxpayers Face

Due Date for Final Estimated Tax Payment for 2023 Tax Year

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For income received in 2023, estimated tax payments were due:

• April 18, 2023, for income received from Jan. 1 to March 31, 2023
• June 15, 2023, for income received from April 1 to May 31, 2023
• Sept. 15, 2023, for income received from June 1 to Aug. 31, 2023

Those payments were all due last year. However, your estimated tax payment for income received from Sept. 1 to Dec. 31, 2023, is due in 2024—by Jan. 16, 2024, to be exact. And that’s today! The deadline is in just a few hours … so you better act now if you owe that final payment! WealthUp Tip: To see when estimated tax payments are due for the current tax year, go to Estimated Tax Due Dates for 2024. Related: Best Tax Software for 2024

When Estimated Tax Payments Are Excused

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If you’ve already paid all the estimated tax you’re required to pay for the 2023 tax year, you don’t have to worry about the Jan. 16 deadline. You also don’t need to make an estimated tax payment if you won’t owe at least $1,000 in federal income tax for the 2023 year. Estimated tax payments for 2023 are also unnecessary if the combined total of your tax credits for the year and withholding from other sources of income are either:

• 90% of your tax liability for the 2023 tax year
• 100% of your tax liability for the 2022 tax year if your adjusted gross income for that year was $150,000 or less ($75,000 or less if you’re married but filing a separate return for 2023)
• 110% of your tax liability for the 2022 tax year if your adjusted gross income for that year was over $150,000 (over $75,000 if you’re married but filing a separate return for 2023)

If at least two-thirds of your gross income for 2022 or 2023 is from farming or fishing, the 90% tax liability threshold is cut to 66.667% and the 110% threshold for higher-income taxpayers doesn’t apply. Finally, estimated tax payments aren’t necessary for the 2023 tax year if all three of the following are true:

• You had no tax liability for the 2022 year (i.e., your total tax was zero or you didn’t have to file an income tax return).
• You were a U.S. citizen or resident alien for the whole year.
• The 2022 tax year covered a 12-month period.

Related: IRS Erases $1 Billion In Back Tax Penalties

Extended Due Dates for Victims of Natural Disasters or Terrorism

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Tax filing and payment deadlines—including estimated tax payment due dates—are often extended for victims of natural disasters. This is true when it comes to the Jan. 16 estimated tax deadline, which has been extended for taxpayers impacted by:

• Illinois storms and flooding that began on Sept. 17, 2023 (deadline extended to Feb. 15, 2024)
• Louisiana seawater intrusion that began Sept. 20, 2023 (deadline extended to Feb. 15, 2024)
• Tennessee storms and tornadoes that began on Dec. 9, 2023 (deadline extended to June 17, 2024)

In addition, qualified taxpayers impacted by the terrorist attacks in Israel that began on Oct. 7, 2023, have until Oct. 7, 2024, to make the estimated tax payment due on Jan. 16. Related: States That Tax Social Security Benefits

Calculating and Paying Estimated Taxes

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Use Form 1040-ES and the accompanying instructions to calculate your estimated tax payment. Since you’ll need to estimate several 2023 tax amounts, it might help to use totals from your 2022 tax return as a starting point and then tweak those figures to account for any tax law modifications or changes to your own situation (e.g., more or less income, marriage or divorce, having a baby, etc.). If your income goes up and down during the year (e.g., you have seasonal income from a side job), you can use the annualized income installment method to calculate the amount of your payment. With this method, your tax is analyzed at the end of each payment period based on a reasonable estimate of your income, deductions, and other items from the beginning of the year through the end of the period. This could allow you to lower or eliminate estimated tax payments for one or more payment periods. Once you know how much to pay, there are a number of ways to actually make your estimated tax payment. For example, you can:

• Authorize a direct transfer from your bank account
• Pay with a debit or credit card online or over the phone (fees apply)
• Mail a paper check or money order to the IRS with Form 1040-ES
• Pay with cash in person at an IRS retail partner (maximum of $1,000 per day per transaction; must first register online at fed.acipayonline.com)

Details of the various tax payment methods are available on the IRS website. Like WealthUp’s Content? Be sure to follow us.

Claiming Estimated Tax Payments on Your 2023 Tax Return

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Here’s some good news … you can claim all your estimated tax payments for the 2023 tax year as a credit on your 2023 federal income tax return. Report all your payments for the tax year on Line 26 of your Form 1040, and that total will be subtracted with other payments and credits from your tax liability. Related:

• What’s Your Standard Deduction?
• 2024 Tax Calendar (Tax Deadlines for the Entire Year)