Be sure to have the following items ready for preparing your 2024 tax returns:

New Clients

• Please have a copy of your 2023 tax returns (or the last year you filed)

Income Documents

• W-2 form(s) from your employer(s)
• 1099-G form if you received unemployment benefits in 2024
• 1099-SSA if you received Social Security in 2024
• 1099-R if you received retirement or pension payments
• 1099-K if you received payments from PayPal, Venmo, Square, etc.
• Any other 1099s you received for interest, investment income, etc.
• Income & expenses from self-employment or rental properties

Deductions

• Be sure to notify your tax preparer of any changes in your family (marriage, divorce, new children, etc.) during 2024
• 1098 Form(s) received for Mortgage Interest paid in 2024
• The amount you paid for Property Taxes in 2024. Note: If you paid in two installments, this will usually be Installment 2 of your 2023-24 tax bill, and Installment 1 of your 2024-25 tax bill.
• Charitable contributions you made in 2024
• Auto Registration renewal statement(s) received from the DMV in 2024

Health Care

• Although there is no longer a Federal mandate for health insurance, California still requires everyone on your tax return (including your spouse and dependents) to have health coverage or you may have to pay a fine.
• If you receive health coverage through your employer, please provide Form 1095-B to your tax preparer. Your employer should have given you this form.
• If you obtained health coverage from Covered California, please provide Form 1095-A to your tax preparer. Covered California mailed you this form in January. If you have not received it, please click here for instructions.

Identity Protection PIN

• If you have experienced identity theft, the IRS may issue you an Identity Protection PIN. You will receive a new IP PIN each year. The IRS will send you a letter in the mail in January with your IP PIN. This is required to file your tax returns. If you received an IP PIN in the mail, please provide it to your tax preparer.
• If you did not receive your IP PIN or you lost it, click here to retrieve it or have a new one issued to you by the IRS.

The due date for 2024 personal tax returns is Tuesday, April 15, 2025.

An extension gives you extra time to file your tax returns without having a late filing penalty, as long as you file before the extended due date.

To get an extension, you must request it on or before the regular due date of your return.

For individual taxpayers, your extension gives you until October 15 to file your returns.*

However, please note that an extension does not give you more time to pay any tax due. The due date for payments is still April 15.

If you pay after April 15, even if you have an extension, you will have to pay a late payment penalty, plus interest, on the unpaid balance until it is paid off.

How to Reduce or Eliminate Late Payment Penalties

To reduce or eliminate late payment penalties, you have a couple of options:

• Make a payment with your extension. This can be arranged with your tax preparer at the time you file your extension. Or you can make a payment online at the IRS website. Be sure to specify that you are making an Extension payment for 2024.

  What if I don’t know how much tax I will owe? Your tax preparer can help you estimate what you might owe, or you can start with the tax you owed last year and adjust it depending on whether your income went up or down this year. It is better to pay something even if you don’t know exactly how much it will be. If you overpay, you will receive a refund. If you underpay, your penalty will be based only on the amount you are short, so it will be much less than it would be if you don’t pay anything.

• Request a payment plan. This can be done online at the IRS website. You will still pay penalties and interest on the unpaid portion, but your balance will go down each month so your penalties and interest will decrease. As long as you keep up your monthly payments, the IRS will not pursue collection actions against you. You can always make extra payments or pay off the balance any time to stop additional penalties from accruing.
• Increase your withholding or make estimated tax payments. This option won’t help this year, but it will help you avoid penalties next year. If you are paying enough during the year to cover your tax, you don’t have to worry about penalties if you get an extension.

How Much are the Penalties?

• The late filing penalty is 5% of your unpaid tax for each month (or part of the month) your return is late.

  For example, if your tax is $1,000 your late filing penalty will be $50 if you file between April 16 and May 15, $100 if you file between May 16 and June 15, $150 if you file between June 16 and July 15, etc. The maximum is 25%.

• The late payment penalty is 0.5% (one half of 1 percent) of your unpaid tax for each month (or part of the month) your payment is late.

  For example, if your tax is $1,000 your late payment penalty will be $5 if you pay between April 16 and May 15, $10 if you pay between May 16 and June 15, $15 if you pay between June 16 and July 15, etc.

• Interest is also charged on your unpaid tax. The annual interest rate is currently 7%.

So you can see, the late filing penalty is much higher than the late payment penalty (10 times higher, to be precise). Therefore, it is better to file your returns on time (or get an extension and file before the extension due date) and pay late, than it is to file your returns late.

If you are an employee who receives a W-2 from your employer, money is withheld from your paychecks to cover your taxes at the end of the year.

If you have withheld enough, then you will not owe any taxes, and you might even get a refund if you have withheld more than the taxes you owe.

However, if you have not withheld enough, then you will owe taxes when you file your tax returns.

But even if you are withholding from your paychecks, you might still owe taxes at the end of the year. For example, if you have significant investment income like interest, dividends, or capital gains from the sale of stocks. If you are self-employed or have income from rental properties, you might also owe taxes at the end of the year. Or if the withholding on your W-4 form is not enough for your filing status, you still could owe.

What are Estimated Taxes?

If you are making money without withholding, the IRS still wants you to pay taxes throughout the year instead of waiting until the end of the year to pay it all at once. Just as they get money from employees all year ’round, they want money from people making other types of income all year ’round as well. These payments are called estimated taxes.

Estimated taxes are due quarterly, specifically:

• April 15
• June 15
• September 15
• January 15

Yes, I know this is not really quarterly as some payments are due more or less than 3 months apart, but that’s just the way it is.

What is the Estimated Tax Penalty?

If you do not make estimated taxes when you are supposed to, then the IRS (and many states as well) will charge you an estimated tax penalty. Specifically, if you owe more than $1,000 in Federal tax with your tax return, you will owe the Federal estimated tax penalty. If you owe more than $500 in California taxes, you will owe the California estimated tax penalty as well.

Often, this penalty is calculated on your tax return and added to the amount you owe. The calculation is based on the current interest rates, and is currently about 5.3% of the tax you owe.

NOTE: In 2023, most residents of California received an automatic extension until November 15, 2023 to file and pay their 2022 taxes. This extension applied to 2023 estimated taxes as well. This means that the automatic calculation of the Estimated Tax Penalty on the 2023 tax return was too high (because it is based on the first quarterly payment being due April 15). Therefore, if you had an estimated tax penalty on your 2023 return, you will probably get some of it refunded.

If you did not include the Estimated Tax Penalty on your 2023 tax return, then the IRS will send you a bill for this penalty. Some bills this year say that the estimated tax payment was “miscalculated” on the tax return. However, it is the IRS who originally miscalculated the penalty for California residents based on the normal due date of April 15. The notices now have the correct penalty based on the extended due date.

You can check to see if you paid the estimated tax penalty by looking at Line 38 on your Form 1040 tax return. If this line is blank, you did not already pay the penalty. If Line 37 is over $1,000 then the IRS will send you a bill if you owe an estimated tax penalty.*

*Note: Under some circumstances you might not owe a penalty even if you owe over $1,000. For example, if you owed no tax last year, or if you withheld at least as much as you owed the previous year.

How do I avoid the Estimated Tax Penalty?

• If all or most of your income comes from W-2 employment, and you are not withholding enough to cover your taxes, you need to submit a new Form W-4 to your employer to adjust your withholding. Your tax preparer should be able to help you complete your W-4 so that you don’t owe next year.
• If you are self-employed or have significant income without withholding, you should make quarterly estimated payments. Your tax preparer can prepare vouchers for you which you can send in with your check on each due date. You can also make estimated tax payments online at the IRS website. If I prepare and e-file your tax returns, I can also have your payments automatically withdrawn from your bank account on the due dates so you don’t have to remember to do it yourself.