IRS alerts taxpayers of Sept. 15 deadline to prevent tax surprises.
The Internal Revenue Service (IRS) has issued a reminder that some taxpayers face a looming deadline to pay estimated tax payments in order to “stay current and avoid a surprise at tax time” in the form of potential penalties for underpayment.
Certain categories of taxpayers that do not have taxes withheld from their income through an employer or other withholding agent face a Sept. 15 deadline to submit their third quarter estimated tax payments.
Estimated tax payments are typically made by individuals and entities that do not have taxes withheld from their income, including gig workers, sole proprietors, retirees, partners, and S corporation shareholders. Retirees and individuals with irregular income (such as those with seasonal) income could also be required to make estimated tax payments if their income is not subject to withholding.
The key threshold for determining whether estimated tax payments are required is if the taxpayer expects to owe $1,000 or more in taxes when they file their annual tax return after accounting for withholding and tax credits.
“The IRS encourages taxpayers earning income not normally subject to withholding to consider making estimated tax payments throughout the year to stay current and avoid a surprise at tax time,” the tax agency said in a statement.
Adjusting Withholdings
On Jan. 19, 2023, the IRS announced that it made available an online tool that taxpayers can use to determine if they have too much or too little tax withheld from their paychecks.
Having too much tax withheld and waiting for a refund at tax time is akin to giving the government an interest-free loan.
But if a taxpayer does not have enough taxes withheld from their paychecks throughout the year, they may owe a balance when they file their taxes. This means they will have to pay the remaining balance of taxes owed to the IRS when they file their tax return.
Owing a balance at tax time can be a significant financial burden, especially if the balance is large or if the taxpayer is struggling to make ends meet.
There are also penalties and interest that may apply when the taxpayer owes a balance when filing their taxes.
The IRS charges interest on any unpaid taxes starting from the original due date of the return. Penalties may also be assessed if the taxpayer fails to file their return on time or if they owe taxes and fail to pay them by the deadline.
Tax Enforcement Crackdown
The IRS’s reminder to taxpayers that they face a Sept. 15 deadline for submitting estimated tax payments comes as the agency prepares to launch what it calls a “sweeping, historic” tax enforcement crackdown using cutting-edge technology like artificial intelligence to boost tax revenue.
The Inflation Reduction Act that President Joe Biden signed into law in 2022 initially included around $80 billion to expa
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