The due date is upon us for the second quarter tax payment. A question that I often get asked is, “do I need to be making quarterly tax payments?” and the answer is, it depends. If you expect to earn income from sources outside of employment and expect to owe $1,000 or more in taxes by the time you file, then the answer is, yes! The reason that you want to pay taxes on the federally required Pay-As-You-Go method is to avoid paying an underpayment penalty.
The next question becomes, how much should you pay each quarter. The IRS has two methods that will allow you to meet safe harbor rules (to avoid the underpayment penalty). You can either pay the lower of 100% of the tax you owed last year or pay 90% of the tax you owe in the current year. Under the first method, take a look at your tax return from last year. Your total tax can be found on line 24 of Form 1040 (2023). You can take this number and divide it by 4, this will be the amount that should be paid in each quarter.
The second method is a little bit tricker. Look to Form 1040-ES to determine your taxable income and resulting income tax. Form 1040-ES can be a little intimidating, I encourage you to reach out to your previous tax preparer for additional guidance.
To make your payment, the IRS provides various payment options, but here’s another. If you’re employed, you can ask your employer to withhold additional amounts by providing them with a new W-4 Form. Additional withholding amounts can be requested on line 4(c), Extra Withholding. Income tax whether it’s withheld from employment wages or paid directly to the IRS are going to the same place.
Your quarterly due dates are the following:
1st payment – April 15, 2024
2nd payment – June 17, 2024
3rd payment – September 16, 2024
4th payment – January 15, 2025
I hope you found this information to be helpful. Please leave a comment below if you have any questions or would like to provide feedback.