Tax season can be a stressful event, but it doesn’t have to be. One way to make the process easier is to make quarterly estimated tax payments. Paying quarterly taxes is especially important for the self-employed or those with freelance or side hustles, but it is also beneficial for those employed by someone else.
For those who need to pay quarterly taxes, the 2023 tax year will be slightly different than in years past. Tax brackets, deductions, and credits have all changed, so it’s important to understand the new rules and regulations before making any payments. Here’s an overview of the estimated tax requirements for the 2023 tax year.
Who Needs to Pay Quarterly Taxes?
Typically, those who are self-employed or have side hustles need to pay quarterly taxes. This also applies to those who have significant income from investments or rental properties. If you receive a Form 1099-MISC from a client, you likely need to pay quarterly taxes.
If you are employed by someone else, you may still have to pay quarterly taxes. Generally, those who are employed are expected to have taxes withheld from their paychecks. However, if you don’t pay enough through withholding, you may need to make estimated payments. This is also true if you have other income that isn’t subject to withholding.
When Are Quarterly Taxes Due?
Quarterly estimated taxes are due on the 15th day of the fourth, sixth, ninth, and twelfth months of each tax year. In 2023, this means that the due dates are April 15th, June 15th, September 15th, and January 15th of the following year. If the due date falls on a weekend or holiday, the payment will be due on the next business day.
If you fail to pay on time, you will incur penalties. The good news is that the IRS will generally waive the penalty if you pay by the end of the tax year, as long as 90% of the total tax liability is paid. If you don’t pay by the end of the tax year, the penalty will be assessed.
How Much Should I Pay?
The amount of tax paid with each estimated tax payment should be based on your total expected tax liability for the year. You can use the IRS Tax Withholding Estimator to determine how much you need to pay. This tool is especially helpful for those who are employed and are not sure if they need to make estimated payments.
The amount you pay should be based on your estimated total income and deductions. If you are employed, you should also factor in the amount withheld from your paychecks. You should also factor in any credits or refunds you expect to receive when determining how much to pay.
How Do I Make Quarterly Tax Payments?
There are several ways to make estimated tax payments. The most common method is to use the IRS’s Direct Pay system. This allows you to pay directly from your bank account without any fees. You can also mail a check or money order, or you can pay using a credit or debit card. However, credit and debit card payments come with fees.
You also have the option of paying through third-party payment providers. These providers, such as PayUSAtax, allow you to make estimated tax payments online. They typically come with fees, but they are often lower than the fees charged by the IRS. You should compare fees before deciding which payment method to use.
What Forms Do I Need to File?
When you make your estimated tax payments, you should also include a payment voucher, or Form 1040-ES. This form is used to document your estimated tax payments and should include your Social Security number, address, and the tax year. You should also include a copy of your most recent tax return.
You also need to file a Form 1040 or Form 1040-SR when you file your taxes. This form is used to report your income, deductions, and taxes. You should also file any other forms that are required for your specific situation.
Conclusion
Paying quarterly taxes can seem like a daunting task, but with the right preparation and knowledge, it can be made easier. By understanding the new rules and regulations, as well as the payment options and forms needed, you can make your estimated tax payments with confidence. It’s important to pay on time to avoid any penalties or interest charges.
