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fourth-quarter tax deadline is Jan. 17. Find out how to avoid penalties

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Should you didn’t pay enough taxes in 2022, there’s still time to avoid a “surprise tax bill” and bypass extra penalties, in keeping with the IRS

The deadline for fourth-quarter estimated tax payments for 2022 is Jan. 17, which applies to income from self-employment, investments, gig economy work and more.

“It’s where you’ll be able to make yourself whole at the tip of the yr,” said certified financial planner John Chichester Jr., founder and CEO of Chichester Financial Group in Phoenix.

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Should you’re not withholding taxes out of your income, you sometimes must make payments 4 times per yr. Otherwise, it’s possible you’ll owe interest and a late-payment penalty of 0.5% of your unpaid balance per 30 days or partial month, as much as 25%. 

The IRS says Direct Pay is the “fastest and easiest” option to make payments, with online scheduling options before the Jan. 17 deadline.  

It’s also possible to make payments through your IRS online account, which provides access to payment history, or digitally through the Electronic Federal Tax Payment System. You may see other options through the IRS payments website

There is a ‘secure harbor’ to avoid federal tax penalties

One key thing to know: Chichester said there is a “secure harbor” to avoid underpayment penalties on your yearly federal taxes.

You will not owe federal penalties for those who’ve paid, over the course of 2022 and thru the Jan. 17 deadline, the lesser of 90% of your 2022 taxes or 100% of your 2021 bill in case your adjusted gross income is $150,000 or less. (Go for the latter strategy, and you’ll have 110% of your 2021 bill for those who earn greater than $150,000.)

Nevertheless, the secure harbor is not a guarantee you will not owe more federal taxes for 2022, Chichester said. He urges clients to put aside at the very least 20% of earnings to cover federal taxes, plus a smaller percentage for state taxes, depending on where they live.

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