Regarding Quarterly Estimated tax payments

4CMCtaxinfo

I have not previously been required to file Quarterly Estimated tax payments. If I have a large windfall profit in December 2023, would I be required to make an Estimated tax payment January 15, 2024, or could I wait to file and pay tax due in April ?

[Deleted User]

Hello 4CMCtaxinfo!

That is a great question! According to the IRS, to avoid an underpayment penalty, you'll want to make estimated tax payments if both of the following apply:

1. You expect to owe at least $1,000 in tax for 2023,
after subtracting your withholding and refundable credits.

2. You expect your withholding and refundable credits
to be less than the smaller of:
a. 90% of the tax to be shown on your 2023 tax return,
or
b. 100% of the tax shown on your 2022 tax return.
Your 2022 tax return must cover all 12 months.

So if you expect to owe $1000 or more with your 2023 tax return, then you'll want to make sure your withholdings and refundable credits cover either 90% of the tax on your 2023 tax return, or 100% of the tax shown on your 2022 tax return. If they don't, then you'll need to make estimated tax payments.

This is the case for general situations. You can read more about estimated tax payments from Form 1040-ES with this IRS website: https://www.irs.gov/forms-pubs/about-form-1040-es