IRS Tax Deadline Looms: 'You Could Owe Thousands If You Miss January 15,' Experts Warn

As the new year begins, many Americans who receive non-payroll income will need to meet an IRS quarterly estimated tax obligation. This applies to any income that has not been subject to automatic federal withholding at the time of receipt. Self-employed earnings, investment income, and side incomes are all included in this obligation.

Your next instalment for the 2025 tax year must be paid by 15 January. Failure to do so can lead to hefty penalties and interest charges. While missing the deadline might result in a refund when you file your annual return, in some cases, individuals who neglect to make their payment could find themselves facing substantial additional costs.

Who Must Make Estimated Payments?

Generally, individuals and businesses are required to make quarterly estimated tax payments if their withholding does not cover their entire tax liability. Examples include independent contractors, gig economy workers, landlords, investors, small business owners, and those who receive W 2 forms but have had insufficient tax withheld.

An individual must also make estimated payments if they expect to owe at least $1,000 in federal income tax after subtracting the total withheld, along with refundable credits. Taxpayers may also need to pay estimated taxes if their withholding and credits total less than 90% of their current year's liability or less than 100% of their previous year's total tax bill.

Those with a higher adjusted gross income—more than $150,000 for a single filer, or more than $75,000 for a married individual filing separately—are subject to a higher threshold, which is calculated as 110% of their prior year's tax liability.

Self-employed individuals and those receiving income from sources outside of formal employment are often the most common group required to make estimated payments, as no taxes are automatically deducted from their earnings. Failing to pay on time can lead to increased financial strain for this group, making awareness of the deadline crucial.

Payment Options

Taxpayers have several options for making their estimated payments through the IRS. Online payments can be arranged via the IRS website, the IRS2Go app, Direct Pay, or the Electronic Federal Tax Payment System (EFTPS). Debit and credit cards can also be used for payment, although additional fees may apply.

For those who prefer not to pay online, alternative methods include mailing a payment with Form 1040-ES, along with the payment voucher, or paying in cash at designated IRS-approved locations. It is advisable to choose a method that ensures the payment reaches the IRS by the due date of 15 January.

Penalties for Missing the Deadline

Failure to pay estimated taxes on time may result in penalties for underpayment when filing your tax return. If an individual is entitled to a refund but has penalties for underpayment, interest and penalties will accrue on any unpaid amounts until the refund is issued. These penalties apply regardless of whether there is any other tax owed when submitting the return.

The IRS does have discretion to waive or reduce penalties in certain circumstances. Relief may be available for taxpayers affected by disasters, casualties, or other extraordinary events. Additionally, taxpayers over 62 years old or those who have become disabled may qualify for relief if they can demonstrate that their failure to pay was due to reasonable cause and not wilful neglect.

The safe-harbour rule is a provision that allows certain taxpayers to avoid penalties by paying either 90 per cent of their current tax bill or 100 per cent of their prior year's tax liability. High-income earners, however, must pay 110 per cent of their previous year's tax liability to meet the safe-harbour threshold.