As the deadline for payment of third quarter estimated taxes approaches on Sept. 16, the IRS has released some guidelines indicating who may not be required to make such payments. Although many taxpayers are likely to submit these payments, there still exist certain groups of persons and companies that do not have to pay automatically under any circumstances as a result of specific conditions like disaster management.
Who should pay estimated taxes
Projected tax liabilities are generally used by the IRS to collect taxes all year round from taxpayers whose incomes are not subject to automatic withholding. This applies to a range of people like gig workers, retirees, freelancers and business owners among others. Generally speaking, if you think that your tax return for 2024 would reach $1,000 or more then it is compulsory for you to make quarterly payments.
In general estimated tax payments depend on how much you plan to owe after subtracting withholdings and tax credits. According to IRS guidelines payments should be made if:
- For 2024 you anticipate owing at least $1000 in taxes which is after taking away everything withheld and all other possible tax deductions.
- Your withholdings plus tax credits would amount to less than ninety percent (90%) of your tax obligation for the year 2024 or would also equal one hundred percent (100%) of what you paid back in 2023.
Not meeting such rules may result in penalties because of underpayment among others. However some taxpayers can be exempted from the September 16th deadline based on extraordinary situations.
Who are the taxpayers affected by natural disasters
One of the primary reasons for exemption is if you live or work in a federally recognized disaster area. According to the IRS, residents and business owners in 17 states, Puerto Rico, and the Virgin Islands may automatically qualify for a delayed payment deadline.
The IRS has extended the estimated payment deadline to Nov. 1, 2024, for taxpayers in parts of Arkansas, Iowa, Mississippi, New Mexico, Oklahoma, Texas, and West Virginia. Similarly, taxpayers in parts of Florida, Georgia, Kentucky, Minnesota, Missouri, North Carolina, Puerto Rico, South Carolina, South Dakota, Texas, Vermont, and the Virgin Islands have until Feb. 3, 2025.
If you are unsure whether your area qualifies for this relief, you can check the IRS disaster relief page or call their customer service for more information.
What groups are exempted from the September 16 deadline
Apart from disaster victims, other groups also enjoy exemptions from the estimated tax payment deadline under specific circumstances. These include:
- Farmers and fishermen: Special rules apply to these taxpayers, allowing them to pay their estimated taxes once a year, instead of quarterly.
- Recent retirees or disabled individuals: If you recently retired or became disabled, you may qualify for a waiver of penalties for underpayment of taxes.
- Taxpayers with uneven income: If your income varies significantly throughout the year, you may also be exempt from penalties for late payments under certain conditions.
Relief for those facing unusual circumstances
The IRS allows taxpayers to request a waiver for penalties due to underpayment if they can prove that the shortfall was caused by “unusual circumstances” and not by intentional neglect. This relief can be especially helpful for people who receive income sporadically or experience unforeseen financial difficulties during the year.
For example, if as a taxpayer, you unexpectedly lose your job, had a significant reduction in your business income, or faced other financial hardships, you can apply for a penalty waiver using Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts.
How to stay up-to-date on tax payments
If you’re required to make estimated payments, keeping up with your obligations is crucial. The IRS provides several easy and secure ways to make these payments:
- Online through IRS direct pay: This allows you to make payments directly from your checking or savings account without any fees.
- Electronic Federal Tax Payment System (EFTPS): This system allows you to schedule payments ahead of time.
- Credit or debit cards: Although these payment methods are available, note that the payment processor charges a fee, not the IRS.
- By mail: You can also send a check or money order, payable to the “United States Treasury,” but make sure to do so ahead of the deadline to avoid late penalties.
