Once you put your 2023 tax return to bed, you can rest easy for a while...right? Wrong.
Strategy: Make sure you meet your estimated federal income tax payment obligations for 2024. Typically, you’ll have to make a payment for the first quarter of your 2024 tax year by April 18. In particular, you must be careful to avoid a potential tax trap if you own an interest in a pass-through entity that produces positive taxable income.
Here’s the whole story: Generally, you’re required to pay in federal income tax for the current tax year through any combination of withholding and quarterly estimated tax installments. If you normally receive the bulk of your income from a regular job, withholding by itself can do the trick. But you may have to make quarterly estimated tax payments if you earn substantial investment income, are self-employed or own an interest in a pass-through entity such as an LLC, partnership or S corporation. Similarly, retirees may have to make estimated tax payments due to Social Security benefits, investment income and required withdrawals from IRAs or other retirement accounts.