This ‘rule of thumb’ shows who needs to pay taxes by Sept. 16

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The third-quarter estimated tax deadline for 2024 is Sept. 16, and skipping a payment could trigger a penalty, according to the IRS.

Typically, you need estimated payments for any income without tax withholdings, such as earnings from self-employment, contract or gig economy work and investment or retirement income. 

Some filers also need estimated payments if they haven’t withheld enough taxes from a full-time or part-time job.  

Estimated payments can help avoid “refund disappointment or balance due shock,” said Mark Steber, chief tax information officer of Jackson Hewitt.

If you’re unsure, there’s a general “rule of thumb” for who should make a payment, the IRS outlined in a news release last week.   

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You should make estimated tax payments if you expect to owe at least $1,000 in taxes after subtracting your 2024 withholdings and tax credits or if you can’t meet so-called “safe harbor rules,” according to the IRS.

The safe harbor rules say you can avoid IRS penalties by paying at least 90% of your 2024 tax liability or 100% of 2023 taxes, whichever is smaller. You must meet these thresholds throughout the year.

That percentage jumps to 110% if your 2023 adjusted gross income was $150,000 or higher. You can find adjusted gross income on line 11 of Form 1040 from your 2023 tax return.

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