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Keep in Mind these Two Other April Tax Due Dates

April Tax Deadlines

Did you know that there are two tax deadlines coming in April, neither of which is the filing of 2022 tax returns?

The first is for taxpayers that turned 72 in 2022 and is on April 1st. This is the last day one can start receiving required minimum distributions (RDMs) from workplace plans like IRAs, 401(k)s and similar.

The second date happens to fall on April 18th, Tax Day, and this deadline is for anyone required to make a first quarter estimated payment for 2023. There is more detail on both deadlines below.

RMDs

Anyone that turned 72 in 2022 falls under a rule unlike others. Generally, RMDs are made by the end of the calendar year, but with this rule for IRA account owners and similar plans, the first distribution can wait until no later than April 1, 2023.

Starting January 1, 2023, the age will increase to 73 under the Setting Every Community Up for Retirement Enhancement 2.0 Act (SECURE 2.0). This won’t be applied to those who turned 72 in 2022.

And a reminder, you could get penalized for taking less than the required pay-out.

Estimated Payments

Estimated payments are generally needed to be made by people that receive income that is not subject to withholding; this includes investment income (e.g., interest, dividends, capital gains) and self-employment. One could be “underpayment of tax” penalties in addition to the income tax that’s due if not enough withholding/estimated payments are made throughout that tax year.

Estimates are “required annual payments” that are commonly split quarterly and are expected on April 15, June 15, September 15, and January 15 of the following year. If that date is over a weekend and/or on a holiday, the payment will be due the next business day.

Required annual payments are calculated by taking the lesser of 90% of the current year or 100% of the previous year’s tax shown. If adjusted gross income for the previous year was over $150,000 for married filing jointly or $75,000 for individuals and married filing separately, then the amount to base the estimates is increased:  90% of the current year or 110% of the previous year’s tax liability.

For those who have most of their income coming from wages, they can typically satisfy the payment requirements with their withholdings on paychecks and/or retirement income. And for others that don’t have steady income throughout the year (such as seasonal workers) they may be able to make smaller payments by using the annualized income method for calculating their current year tax estimates.

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