Now is the time to review your tax situation and pay your estimated quarterly taxes using IRS Form 1040-ES. If you haven’t already paid, the fourth quarter due date for the 2023 tax year is now here.

Your Estimated Taxes

Due date: Tuesday, January 16, 2024

You are required to withhold at least 90% of your 2023 tax obligation or 100% of your 2022 federal tax obligation. If your income is over $150,000 ($75,000 if married filing separately), then you must pay 110% of last year’s tax obligation to be safe from an underpayment penalty. A quick look at your 2022 tax return and a projection of your 2023 tax return can help determine if a payment is necessary.

Your Tax Obligation

Here are some other things to consider:

• Underpayment penalty. You could be subject to an underpayment penalty if you do not have proper tax withholdings. The penalty can occur if you do not have proper withholdings throughout the year. A fourth-quarter catch-up payment may not help avoid an underpayment penalty if you didn’t pay enough taxes in prior quarters.
• Self-employment taxes. Remember to also pay your Social Security and Medicare taxes, not just your income taxes. Creating and funding a savings account for this purpose can help avoid a cash flow hit each quarter when you pay your estimated taxes.
• Don’t forget state obligations. You are often required to make estimated state tax payments when required to do so for your federal tax obligations. However, this is not necessary in a select few states. So, be sure to review your specific state obligations to ensure you meet these quarterly estimated tax payments.

Please contact our RRBB advisors with any questions or concerns regarding your tax situation.