The term “tax season” is a little misleading. Unless you have a simple W-2 job with little extra income, tax planning, preparation, and filing are year-round concerns. And that means planning for more than just the April 15 deadline.
In this guide, we’ll cover the most common 2024 tax deadlines—from estimated payments to required minimum distributions—what they mean and how you can prepare.
Let’s dive in.
Estimated Tax Payments
Most employers withhold estimated income tax from each paycheck, but you may owe estimated tax payments if you have income that isn’t subject to withholdings. This income includes interest or capital gains from cryptocurrencies, freelance jobs, or other investments.
But there’s an important caveat: If you didn’t owe anything during the previous year or expect to owe less than $1,000, you don’t need to make estimated tax payments. However, if you choose not to make them, you should still set money aside (in an interest-bearing account!) to ensure you can afford the sizeable year-end tax bill.
If you owe estimated taxes, Form 1040-ES tells you how much you should pay each quarter. If the income you expect to earn changes, you can complete another Form 1040-ES to recalculate your estimated tax for the next quarter. Or, to be safe, you can pay 100% of the taxes you paid last year (or 110% if you’re a high earner).
If you don’t pay your estimated tax, the IRS automatically charges you 0.5% of the amount that you didn’t pay for each month that you don’t pay, up to 25%. If you cannot afford to pay, you should consider setting up a payment plan to lower the amount to 0.25%.
The estimated tax due dates are:
- April 15, 2024
- June 17, 2024
- September 16, 2024
You can make estimated tax payments on the IRS website, using the IRS2Go app, or by mailing Form 1040-ES with a check.
Tax Returns & Extensions
Most people are familiar with the April 15 tax deadline. You must file your tax paperwork and make any payments by 11:59 p.m. in the timezone of your tax return to avoid interest and penalties. But if you can’t make the deadline, you have some options.
Here are the 2024 tax brackets:
2024 Tax Brackets – Source: Tax Foundation
If you need more time, you can file for an automatic six-month extension with Form 4868, giving you until October 15, 2025, to file your taxes. That said, it’s critical to note that you must still pay taxes on April 15, 2025, to avoid penalties and interest.
There are two penalties to keep in mind:
- Failure to File. A penalty of 5% of the unpaid taxes for each month or part of the month that the tax return is late, up to 25% of the unpaid tax.
- Failure to Pay. A penalty of 0.5% of the unpaid taxes for each month or part of the month the tax remains unpaid, up to 25% of the unpaid tax.
Note: If both a failure to pay and file are applied, the IRS will reduce the failure to file penalty by the amount of the failure to pay penalty for a total penalty of 5% per month.
The vital note is that you should always file by the deadline, even if you cannot afford to pay on time. The Failure to File penalty is ten times higher than the Failure to Pay penalty, and there’s no excuse for paperwork to be late!
IRA Contributions & RMDs
Some crypto investors use self-directed IRAs to help minimize taxes. The deadline to contribute to these accounts and have it count toward the 2024 tax year is April 15, 2025.
You can contribute up to $7,000 to an SDIRA before age 50, with a $1,000 catch-up contribution for those over 50. Traditional IRAs have no income limits, but you must make less than $161,000 individually or $240,000 if filing jointly to contribute to a Roth IRA.
When you begin making withdrawals, you’ll pay regular income taxes based on your income level if you start withdrawing before age 59 ½. If you withdraw before 59 ½, you’ll owe a 10% penalty and pay income tax. If you withdraw after 59 ½, you only owe tax if you withdraw from a Traditional IRA.
When you turn 73, the IRS requires you to take Required Minimum Distributions (RMDs). The amount you withdraw must meet minimum requirements based on your account balance and life expectancy. Your account custodian will usually provide you with the amount you must take out by December 31, 2024.
Catching Up If You’re Behind
Taxes can be stressful for anyone, but if you’re playing catchup, things can quickly spiral out of control. The best way to regain control is to create a plan.
The first step is filing your 2023 tax return. Using ZenLedger, you can connect your crypto wallets and exchanges, compute your capital gain or loss, and generate the paperwork you need to file. You can provide these forms to your accountant or use our end-to-end tax filing process—powered by April— to finish everything in one place.
Next, if you can’t afford to pay your tax bill, you should set up an IRS payment plan to reduce penalties and interest. Generally, the IRS offers a short-term 180-day or less payment plan or a long-term installment agreement. If you owe a substantial amount, you can also make an offer in compromise to settle your tax debt for less than you owe.
And finally, even if you haven’t fully paid your 2023 tax bill, you should start preparing for 2024. For example, you should compute your estimated tax payment amounts and try to make these payments on time to avoid penalties and interest. Even if you can’t afford to pay, knowing how much you owe can reduce stressful “unknowns.”
How to Prepare for 2024
Taxes are a year-round process rather than a once-a-year event.
Here’s a checklist to prepare this year:
- Mark your calendar with the dates above.
- Compute your 2024 estimated tax payments.
- Make any final 2023 IRA contributions.
- Harvest your tax losses throughout the year.
- Consider alternative tax strategies (see below).
ZenLedger can help you stay on top of your taxes. In addition to generating tax forms, our platform offers a dashboard to track your crypto holdings year-round, a tax-loss harvesting tool, and grand unified accounting spreadsheets you can use to analyze your taxes in depth with an accountant or auditor.
In addition to crypto tax software, consider alternative tax strategies, like setting up a business entity. Generating income or capital gains through a corporation can help you avoid self-employment taxes and may lower your overall tax bill.
The Bottom Line
Cryptocurrencies can complicate anyone’s taxes.
Whether you’re struggling to finish last year’s taxes or just looking to stay ahead of the curve in 2024, the deadlines and strategies we’ve covered can help. The key is taking the time to implement the advice and plan to avoid penalties and interest – or worse.
ZenLedger can help you stay on top of your taxes. Our platform aggregates your transactions across wallets and exchanges, computes your capital gains or losses, and generates the paperwork you need to file. You can even identify tax-loss harvesting opportunities and track your crypto gains and losses throughout the year.
The above is for general info purposes only and should not be interpreted as professional advice. Please seek independent legal, financial, tax, or other advice specific to your particular situation.
