IRS says avoid 'surprise' tax bill by making fourth-quarter payment before Jan. 17
Taxpayers could be hit with financial penalty if they miss the IRS deadline
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The Internal Revenue Service reminded taxpayers on Thursday to avoid a "surprise" penalty by making a fourth-quarter estimated tax payment by mid-January.
Americans who did not pay enough taxes in 2022 should make a fourth-quarter payment on or before Jan. 17, the IRS said in a news release, or risk an "unexpected potential tax bill" when they file in 2023.
"Either payment method — withholding or estimated tax payments — or a combination of the two, can help avoid a surprise tax bill at tax time and the accompanying penalty that often applies," the IRS said.
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Americans may choose to withhold taxes from their income, or they can make estimated payments to the IRS four times each year. Taxpayers can also choose a combination of both. If you do not make the payments, you may owe interest and a penalty of 0.5% on the entire amount that you owe and up to 25% total.
IRS income tax forms (Associated Press / AP Images)
Experts advise that if you cannot make the entire payment, that you pay as much as you can by the deadline instead of waiting to pay the tax bill in its entirety in order to lessen the potential penalty.
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The option applies to income from self-employment, investments and gig economy work, among others. It is frequently used by independent contractors, freelancers and gig workers, because there is no tax automatically withheld on their income. Some small businesses, as well as landlords and self-employed workers, also take advantage of the practice.
If a taxpayer failed to make a required quarterly payment this year, they could be charged a penalty later. But making a payment before the Jan. 17 deadline could help to lessen any financial fee owed to Uncle Sam — and could eliminate it altogether.
The Internal Revenue Service headquarters in Washington, D.C., on Feb. 25, 2022. (Al Drago/Bloomberg via Getty Images / Getty Images)
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The fastest way to make a quarterly payment, according to the IRS, is electronically using a tool called Direct Pay. Taxpayers can choose to schedule the payment in advance.
However, individuals can also make payments through their IRS Online Account.