Michael Lodge - The Business Advisor - Mediator - 424.542.7299 - www.lodge-co.com:
The Internal Revenue Service (IRS) has recently implemented a significant increase in penalties on estimated taxes for individuals who fail to make accurate, on-time payments or neglect to pay their estimated taxes altogether. As of the beginning of October, the penalty rate surged to 8%, nearly tripling the previous 3% rate. This sharp increase is a consequence of the Federal Reserve's assertive tightening campaign, which led to a surge in interest rates last year to the highest level since 2001. The IRS determines its underpayment penalty by taking the benchmark federal funds rate and adding 3 percentage points, impacting freelancers, gig workers, and other self-employed individuals who are most vulnerable to incurring this late fee.
Freelancers, gig workers, and self-employed individuals must be diligent in meeting their tax obligations to avoid facing the heightened penalties on estimated taxes imposed by the IRS. With the penalty rate now standing at 8%, a substantial increase from the previous 3%, it is crucial for individuals to accurately calculate and make on-time payments of their estimated taxes to steer clear of financial repercussions. The Federal Reserve's aggressive tightening campaign, resulting in soaring interest rates, has heightened the importance of adhering to tax payment deadlines, as failing to do so can lead to significant financial burdens for those who are self-employed. By staying informed about tax requirements and promptly fulfilling their estimated tax obligations, individuals can avoid the risk of being subjected to the elevated penalties imposed by the IRS.
