An IRS penalty increase could cost freelancers and gig workers big time
Americans who underpay their taxes to the IRS will face a hefty fine this spring.
TheStreet's J.D. Durkin brings the latest business headlines from the floor of the New York Stock Exchange as markets open for trading Tuesday, February 27.
Full Video Transcript Below:
REMY BLAIRE: I'm Remy Blaire - reporting from the New York Stock Exchange. Here’s what we’re watching on TheStreet today.
Wall Street is looking ahead to another packed week with earnings season still in full swing, key inflation data and jobless claims Thursday, and several Fed speakers Friday. Investors will be keeping a close eye on these factors for hints into the Federal Reserve’s path forward on interest rates.
Meanwhile, with tax season kicking off, if you underpay the I-R-S, you could be hit with a hefty bill this spring. Under the tax code, the I-R-S penalty for underpaying surged to 8 percent in October 2023, nearly triple the previous 3 percent rate during the same time in 2021.
The I-R-S is required to calculate its underpayment penalty by adding 3 percentage points to the federal funds rate. This increase is thanks to the Federal Reserve’s aggressive tightening campaign which has sent interest rates soaring.
Freelancers, gig workers, and independent contractors are at the greatest risk of being hit with the fees. Taxpayers don’t face a penalty fee for underpayment if the balance owed is less than $1,000.
If you want to avoid the extra fees, you’ll need to pay the I-R-S in full by April 15th. If you can’t pay the full amount by the 15th, pay as much as you can by the deadline, lessening the penalty fee down the line. Payments can be made directly on the I-R-S’s website through the ‘Direct Pay’ option.
That’ll do it for your daily briefing. From the New York Stock Exchange, I’m Remy Blaire with TheStreet.
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