As the third-quarter estimated tax deadline for 2024 approaches on Monday, September 16, it is essential to understand who needs to make a payment to the IRS to avoid potential penalties. The Internal Revenue Service (IRS) emphasizes the importance of making estimated tax payments for individuals with income sources that do not have tax withholdings. This includes earnings from self-employment, contract or gig economy work, investment income, or retirement income.
Importance of Estimated Tax Payments
Making estimated tax payments is crucial for individuals who do not have taxes withheld from their income sources. Failure to make these payments can lead to penalties imposed by the IRS. Mark Steber, chief tax information officer at Jackson Hewitt, highlights the significance of estimated payments in avoiding “refund disappointment or balance due shock.” By making these payments, taxpayers can better manage their tax obligations throughout the year.
Who Should Make Estimated Tax Payments?
The IRS has provided guidelines to determine who should make estimated tax payments. If an individual expects to owe at least $1,000 in taxes after accounting for their withholdings and tax credits from 2024, they should make estimated payments. Additionally, those who cannot meet the safe harbor rules set by the IRS should also make these payments.
Safe Harbor Rules
The safe harbor rules established by the IRS specify that taxpayers can avoid penalties by paying at least 90% of their 2024 tax liability or 100% of their 2023 taxes, whichever amount is smaller. It is crucial to meet these thresholds throughout the year to avoid potential penalties. In cases where an individual’s adjusted gross income in 2023 was $150,000 or higher, the percentage increases to 110%.
Avoiding Timing Penalties
Certified financial planner and enrolled agent Tricia Rosen warns taxpayers about the possibility of incurring a “timing penalty” even if they are within the safe harbor limits. The IRS requires tax payments to be made on income as it is earned, which means that missing deadlines can result in penalties. This underscores the importance of making timely estimated tax payments to stay compliant with IRS regulations.
Quarterly Estimated Tax Deadlines
For the year 2024, the quarterly estimated tax deadlines are as follows: April 15, June 17, September 16, and January 15, 2025. Missing these deadlines can lead to interest-based penalties calculated based on the current interest rate and the amount that should have been paid. These penalties can compound daily, making it crucial for taxpayers to stay on top of their estimated tax payments.
Extra Time for Natural Disaster Victims
Taxpayers impacted by natural disasters in 17 states, Puerto Rico, and the Virgin Islands may be eligible for additional time to make their third-quarter estimated tax payments. The IRS provides provisions for individuals affected by natural disasters, offering flexibility in meeting their tax obligations. It is essential for taxpayers in these regions to consult with the IRS to understand their options regarding estimated tax payments.
The ‘Easiest’ Way to Make Tax Payments
Making tax payments can be simplified by utilizing the resources available through the IRS. The agency offers various payment methods, including online payment options, which can streamline the process for taxpayers. By leveraging these convenient payment options, individuals can ensure timely and accurate payments to avoid potential penalties.
Insights from CNBC PRO
As the third-quarter estimated tax deadline approaches, it is essential for taxpayers to stay informed about financial trends and market developments. CNBC PRO offers valuable insights and analysis on various topics relevant to investors and individuals managing their finances. From market forecasts to investment strategies, CNBC PRO provides a wealth of information to help individuals make informed decisions about their financial goals.
Money Market Funds and Opportunities
Recent trends show that money market funds have reached record highs, signaling a shift in investment preferences. However, experts caution against staying in cash for extended periods, highlighting the need to explore alternative investment opportunities. By diversifying their portfolios and considering different asset classes, investors can capitalize on potential growth opportunities in the market.
Oil Forecast and Market Trends
Morgan Stanley’s recent cuts to its oil forecast reflect the evolving market conditions and traders’ expectations of a demand slowdown. This adjustment underscores the importance of staying informed about market trends and adjusting investment strategies accordingly. By monitoring industry forecasts and economic indicators, investors can position themselves strategically in response to market developments.
AI Stocks and Emerging Opportunities
While Nvidia remains a prominent player in the AI sector, there are other chip stocks worth considering for investment opportunities. As technology continues to advance, opportunities in the AI and semiconductor industries are expanding. By exploring emerging technologies and innovative companies, investors can diversify their portfolios and capitalize on the growth potential in these sectors.
Warren Buffett’s Investment Philosophy
Warren Buffett’s approach to investing emphasizes long-term value creation and fundamental analysis. By focusing on individual company performance rather than macroeconomic factors, Buffett has achieved success in the investment world. Understanding his investment philosophy can provide valuable insights for investors looking to build a robust and sustainable investment strategy.
In conclusion, staying informed about financial trends, market developments, and tax obligations is essential for individuals managing their finances. By making timely estimated tax payments and staying updated on industry insights, taxpayers can navigate the complexities of the financial landscape with confidence and make informed decisions about their financial future.