Tax Tip 2023-04: The deadline for the final 2022 estimated tax payment is January 17

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Issue Number: Tax Tip 2023-04

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The deadline for the final 2022 estimated tax payment is January 17

Many taxpayers make quarterly estimated tax payments during the year to stay current on their taxes. Anyone who paid too little tax in 2022 needs to make a fourth quarter payment on or before Jan. 17 to avoid an unexpected potential tax bill or penalty when they file in 2023.

Here’s who needs to make a payment
Taxpayers who earn or receive income that is not subject to tax withholding such as self-employed people or independent contractors should pay their taxes quarterly to the IRS.

In addition, people who owed tax when they filed their current year tax return often find themselves in the same situation again when they file the next year, so they may want to consider making estimated tax payments. Taxpayers in this situation often include:

• Those who itemized in the past but are now taking the standard deduction
• Two wage-earner households
• Employees with non-wage sources of income such as dividends
• Those with complex tax situations
• Those who didn’t increase their tax withholding

Understanding what's taxable
Most income is taxable, including employment income, refund interest and income from the gig economy and digital assets. When estimating quarterly tax payments, taxpayers should include all forms of earned income, including from part-time work, side jobs or the sale of goods.

Also, various financial transactions, especially those made late in the year, can have an unexpected tax impact that may call for estimated tax payments. Examples include year-end and holiday bonuses, stock dividends, capital gains distributions from mutual funds, and stocks, bonds, virtual currency, real estate or other property sold at a profit.

Delay in requirement for Forms 1099-K
On Dec. 23, 2022, the IRS announced that calendar year 2022 will be treated as a transition year for the reduced reporting threshold of $600. For calendar year 2022, third-party settlement organizations that issue Form 1099-K are only required to report transactions where gross payments exceed $20,000 and there are more than 200 transactions. The IRS also issued frequently asked questions to help people who may receive Forms 1099-K.

Taxpayers must accurately report all income, even if they do not receive a Form 1099-K or other information return.

How to make an estimated tax payment
The fastest and easiest way taxpayers can make an estimated tax payment is to do so electronically using IRS Direct Pay. Taxpayers can schedule a payment before the Jan. 17 deadline. They can also make a payment through their IRS Online Account or the Electronic Filing Tax Payment System.

More information on other payment options is available at Pay Online.

Stay current using the Withholding Estimator
The Tax Withholding Estimator on IRS.gov can often help people determine if they need to make an estimated tax payment. It also helps people calculate the correct amount of tax to withhold throughout the year based on their complete set of tax facts and circumstances. Taxpayers can also use the worksheet included with estimated tax Form 1040-ES, Estimated Tax for Individuals, or read through Publication 505, Tax Withholding and Estimated Tax.

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