Keeping up with tax deadlines can feel overwhelming, especially with varying due dates throughout the year. This blog post aims to simplify the process by highlighting key tax deadlines for June 2024, applicable to both businesses with employees who receive tips and individual taxpayers.
June 10th: Report Tips to Your Employer
If you’re an employee who earns tips and raked in more than $20 in May, you have a responsibility to report those earnings to your employer by June 10th. This is done using IRS Form 4070. Upon receiving this form, your employer will withhold FICA taxes and income tax from your regular wages to cover the reported tips.
In a scenario where your regular wages aren’t enough to withhold the required taxes, your employer will report the uncollected amount in a designated box (box 8) of your W-2 form for the year. You’ll then be responsible for paying this uncollected tax amount when you file your tax return.
June 17th: Estimated Tax Payment Due and Avoiding Underpayment Penalties
The second quarter estimated tax installment for the 2024 tax year is due on June 17th. The US tax system operates on a “pay-as-you-earn” basis, and estimated tax payments are a mechanism for self-employed individuals and those with income sources not covered by withholding to fulfill this requirement.
Failing to prepay a minimum safe harbor amount can lead to an underpayment penalty. This penalty is calculated quarterly and is based on the federal short-term interest rate plus 3 percentage points.
Fortunately, there are ways to avoid this penalty:
- De Minimis Exception: If the underpayment is less than $1,000, you’re exempt from the penalty.
- Safe Harbor Prepayments: There are two safe harbor options:
- Current Year Safe Harbor: Your prepayments must equal or exceed 90% of your projected tax liability for the current year.
- Prior Year Safe Harbor: Your prepayments must be at least 100% of your prior year’s tax liability. This increases to 110% if your Adjusted Gross Income (AGI) surpassed $150,000 ($75,000 for married filing separately).
Example: Let’s say your projected tax for the year is $10,000 and your total prepayments come to $5,600. This leaves an additional $4,400 owed on your tax return. To determine if you owe a penalty, we’ll look at the safe harbor exceptions.
- Current Year Safe Harbor: Since 90% of $10,000 is $9,000, your prepayments fall short, and you wouldn’t qualify for this exception.
- Prior Year Safe Harbor: Assume your prior year’s tax was $5,000. As your prepayments of $5,600 exceed 110% of the prior year’s tax (110% of $5,000 = $5,500), you qualify under this safe harbor and avoid the penalty.
This example highlights the importance of ensuring adequate prepayments, especially with significant income fluctuations. Examples include large capital gains from stock sales, property sales, substantial bonuses, retirement income, etc. Timely payments of each estimated tax installment are also crucial for meeting the safe harbor exception.
Important Note: State tax deadlines and safe harbor rules may differ from federal regulations. It’s recommended to consult with a tax professional for specific state guidelines.
June 17th: Tax Deadlines for US Citizens and Resident Aliens Living Abroad
US citizens or resident aliens living and working outside the US and Puerto Rico have a June 17th deadline to file their 2023 tax returns and settle any tax dues. Military personnel stationed in Israel on active duty during terrorist attacks have an extended filing deadline until October 7th.
Extension Options:
If you haven’t completed your return and require more time to file, you can request a four-month extension by submitting Form 4868. This allows you to file Form 1040 or 1040-SR by October 15th. However, military personnel serving in combat zones may be eligible for further extensions (see details below).
Caution: A filing extension only grants additional time to file, not to pay your tax liability. If you anticipate owing taxes, estimate the amount and submit payment with your extension request. Failing to pay on time will result in late payment penalties and interest charges accruing from the original due date.
Combat Zone Extensions:
For military taxpayers serving in a combat zone/qualified hazardous duty area, the deadline to pay any tax owed is extended. This extension also applies to service members involved in contingency operations like Operation Iraqi Freedom or Enduring Freedom. The IRS offers a generous 180-day grace period after the later of:
- The last day the service member was in the combat zone or served in a qualifying contingency operation.
- The last day the area qualifies as a combat zone.
- The last day of any continuous qualified hospitalization for injuries sustained during service.
There’s an additional extension based on the number of days remaining to take action with the IRS when the service member entered the combat zone or began a qualifying contingency operation.
Remember: It’s never advisable to delay filing your return simply because you owe taxes. The late filing penalty is a hefty 5% per month, capped at a maximum of 25%. In most cases, it’s preferable to file without payment to avoid the late filing penalty. Additionally, you can explore establishing an installment agreement with the IRS, allowing you to spread out tax payments over a period of up to 72 months.
We strongly recommend consulting with a tax professional to determine the most suitable course of action for your specific situation. This blog post is intended for general informational purposes only and should not be construed as tax advice.
By staying informed about tax deadlines and exploring available options, you can ensure timely filing and avoid unnecessary penalties.
