What Is Form 1040-ES for 2024 Estimated Taxes?

Form 1040-ES, Estimated Tax for Individuals, is used to pay taxes on income not subject to withholding, such as from self-employment, interest, dividends, and rent. It ensures that taxpayers meet their obligation to pay taxes throughout the year as income is earned, rather than in a single lump sum. The system also handles tax liabilities on income like unemployment compensation and the taxable portion of Social Security benefits if voluntary withholding is not elected.

Determining if You Need to Pay Estimated Taxes

You must pay estimated tax for 2024 if you anticipate owing at least $1,000 in tax after accounting for all withholding and refundable credits. This rule applies to individuals who are self-employed, independent contractors, or have significant income from investments.

In addition to the $1,000 rule, you are expected to pay estimated taxes if your withholding and credits will be less than the smaller of two amounts. The first is 90% of the tax on your 2024 tax return. The second is 100% of the tax shown on your 2023 tax return, provided it covered a full 12-month period.

For taxpayers with higher incomes, this rule is adjusted. If your Adjusted Gross Income (AGI) for 2023 was more than $150,000 ($75,000 if married filing separately), you must pay the smaller of 90% of your 2024 tax liability or 110% of your 2023 tax liability.

Information and Calculations for Form 1040-ES

To accurately calculate your estimated tax payments, you must project your total expected AGI for 2024. You will also need to determine your expected deductions, whether you plan to take the standard deduction or itemize. Finally, you must account for any tax credits you expect to claim, as these directly reduce your tax liability.

The Form 1040-ES package, which includes the “2024 Estimated Tax Worksheet,” can be downloaded from the IRS website. This worksheet guides you through the calculation using the financial information you have gathered. Your 2023 Form 1040 is a useful guide for estimating these figures, but you must adjust for any expected changes in your 2024 financial situation.

The worksheet walks you through totaling your estimated income, subtracting deductions, and applying the 2024 tax rates to find your projected tax. It then has you subtract your expected tax credits and any federal income tax withheld from other sources. The result is your estimated tax liability for the year, which helps you determine the minimum required annual payment.

Once the required annual payment is determined, you will divide this total by four to arrive at your quarterly payment amount. If your income is not earned evenly throughout the year, you may use the annualized income installment method to adjust your payment amounts for each period, though this is a more complex calculation.

Payment Deadlines and Submission Methods

For the 2024 tax year, estimated tax payments are divided into four periods with specific due dates:

• Payment for income from January 1 to March 31 is due April 15, 2024.
• Payment for income from April 1 to May 31 is due June 17, 2024.
• Payment for income from June 1 to August 31 is due September 16, 2024.
• Payment for income from September 1 to December 31 is due January 15, 2025.

Taxpayers have several methods for submitting their estimated tax payments. The traditional method involves mailing a check or money order with the corresponding payment voucher from the Form 1040-ES package. It is important to use the correct voucher for each payment period.

Electronic payment methods include IRS Direct Pay, which allows for a direct transfer from a bank account at no cost. Another option is the Electronic Federal Tax Payment System (EFTPS), a free government service that can be used for all federal tax payments. Payments can also be made via debit card, credit card, or a digital wallet through one of the IRS’s third-party payment processors, though these services typically charge a processing fee.

Consequences of Underpayment or Late Payment

Failing to pay enough estimated tax or missing a payment deadline can lead to financial penalties. The IRS can impose an underpayment penalty if you did not pay the minimum required for any quarterly period. This penalty can apply even if you are due a refund when you file your annual tax return, as taxes are meant to be paid as income is earned.

The penalty is calculated based on the amount of the underpayment, the time the amount was late, and the applicable interest rate, which can fluctuate quarterly. The IRS uses Form 2210 to determine the penalty amount. While you can fill this form out with your tax return, the IRS will calculate the penalty and send a bill if an underpayment is detected.

You can request a waiver of the penalty under certain circumstances, such as a casualty, disaster, or other unusual event. A waiver may also be granted if you retired after reaching age 62 or became disabled during the tax year, and the underpayment was due to reasonable cause and not willful neglect.