Tax season is right around the corner, and to prevent taxpayers from being surprised by an unexpected penalty, the Internal Revenue Service (IRS) reminded that the deadline to make a fourth-quarter payment is December 17. next January.
The IRS explained that taxpayers who did not pay their taxes in full in 2022 are now required to make a fourth-quarter payment before the 2023 tax season begins.
The federal tax office warned that taxpayers who must comply with this obligation and do not do so before the deadline will receive a fine that they probably did not expect.
To make it easier for taxpayers to underpay taxes and avoid a penalty, the IRS said they can do so through payment methods known as withholding or estimated tax payments.
“Also, a combination of both can help avoid a surprise tax bill at tax time and the corresponding penalty that often applies,” the IRS said in a statement.
The IRS added that voluntary tax withholding can be determined by each taxpayer or they can opt for estimated payments that are made four times a year.
However, the IRS indicated that if taxpayers who must comply with this obligation to make a tax payment in the fourth quarter of the year, in addition to the debt payment, interest and a penalty equivalent to 0.5% of the total amount may be charged. owed, and up to 25% maximum.
What to do if the payment cannot be made
Expert tax preparers recommended that taxpayers avoid a penalty for missing a required fourth-quarter payment for underpayment of taxes or debts as much as possible.
The recommendation is that if a full payment cannot be made, then find a way to cover as much as possible before next January 17 and reduce the amount of a possible penalty.
Who must also pay the fourth quarter of the year
There is another group of taxpayers who must make a payment in the fourth quarter of the year to avoid a penalty, according to the IRS.
These are taxpayers who received a request for a required quarterly payment this year, they could also be required to pay a penalty if they don't make a payment by January 17.
Debt requirements result from income from work when it is done on one's own account, from investments or from jobs in the so-called non-formal economies.
They're common to independent contractors, freelancers, and temporary workers, and they don't automatically have taxes withheld from the income they make.