You may owe the IRS money on Monday — skipping payment could cost you hundreds of dollars

Some taxpayers may not be aware that they owe the IRS a check on Monday, which could leave them owing the agency some change next April.

More Americans are getting caught up in the issue, which involves quarterly estimated taxes or payments made to the IRS throughout the year on income that is not subject to withholding. People who are paid by an employer typically have their federal, state, and payroll taxes withheld directly from their paychecks. But millions of Americans today earn extra money as self-employed people or through their own businesses, where taxes are not deducted.

In these cases, taxpayers are required to send their estimated tax payments to the IRS quarterly, with the next due date falling on June 17. The IRS says that taxpayers who are employed can also get around the issue by asking their employer to withhold more money from their paychecks, but of course this depends on workers first being aware that they may owe additional taxes.

“Taxes are pay-as-you-go taxes, to be paid as income is earned, throughout the year,” the IRS said in a to perceive earlier this month about the June 17 payment deadline.

In other words, whether you earn money through a paycheck or a side gig, you are required to make regular arrangements with the IRS throughout the year, whether through paycheck withholding or quarterly estimated taxes. And the problem is this: skipping this step can result in fines and penalties if you wait until April 15th of the following year to pay.

The number of Americans subject to estimated taxes is on the rise, with IRS data showing that 14 million individuals sent quarterly payments to the tax agency in 2023. That represents a 16% increase from 2022, when an estimated 12.1 million of people paid the quarterly tax. Driving this increase is the growing number of people doing gig or other work. to have started their own businesses. A record 64 million Americans made money through freelance work in 2023, a jump of 4 million from the previous year, according to a analysis from Upwork.

Higher penalties

Failure to pay estimated taxes can result in underpayment penalties, which have become stricter in recent years. That’s because the IRS charges interest, based on the federal short-term rate, on the amount people underpaid — and that financial burden has increased due to Federal Reserve rate hikes since 2022.

The Current IRS Penalty evaluates an interest rate of 8% for underpayments, compared with 3% in 2021 when the Fed’s benchmark rate was near zero. In 2023, the average fine for underpayment jumped to $500 per person, up from about $150 in 2022, IRS data shows.

Who owes quarterly payments?

Generally, freelancers, gig workers, and people who own small businesses through sole proprietorships, partnerships, and S corporations must make quarterly estimated tax payments if they believe they will have a tax liability of at least $1,000 when they file.

Others may also be at risk, including investors who sell assets such as stocks or bonds throughout the year, according to for Fidelity (taxpayers can use this IRS online tool to determine whether they owe quarterly taxes.)

In addition to June 17, the two additional payment dates for the current tax year fall on September 16 and January 15, 2025. (The first estimated quarterly tax deadline for 2024 was April 15.) Taxpayers can make payments online from your checking or savings account through online account for individuals or Federal Revenue Direct paymentor you can use IRS.gov/payments or the IRS2Go app for payments by credit or debit card.