If you have not already done so, now is the time to review your taxes and make an estimated fourth-quarter payment using Form 1040-ES. The due date for the 2024 tax year is now here!

Due date: Wednesday, January 15, 2025

Your withholding is at least 90% of your 2024 tax obligation or 100% of your 2023 federal tax obligation. If your income exceeds $150,000, you must pay 110% of last year’s tax obligation to be safe from an underpayment penalty. If you are married and filing separately, your income must be over $75,000. A quick look at your 2023 tax return and a projection of your 2024 tax return can help determine if a payment is necessary. Here are some other things to consider:

1. 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. So, a fourth-quarter catch-up payment may not help avoid an underpayment penalty if you didn’t pay enough taxes in prior quarters.
2. Self-employment taxes. Remember to pay your Social Security and Medicare taxes, not just your income taxes. Creating and funding a savings account can help avoid a cash flow hit each quarter when you pay your estimated taxes.
3. Don’t forget state obligations. Except for a few states, you must make estimated state tax payments when it is a requirement to do so for your federal tax obligations. Review your state obligations to ensure you meet these quarterly estimated tax payments.

Contact our RRBB advisors if you have any questions or are ready to take the next step.