A few weeks ago, I discussed a problem that many taxpayers were or are facing — an unexpected tax bill and penalty due to insufficient tax withholding. I wrote about special relief that the IRS offered for 2018 returns.
Good news: Last week, the IRS issued a new release that made penalty relief available to more taxpayers. If you haven’t done your taxes yet, or if you filed your 2018 tax return and paid a penalty, read on.
First, sweeping tax law changes went into effect in 2018 as a result of the passage of the Tax Cuts and Jobs Act in December 2017.
Second, the IRS updated tax withholding tables for 2018 “largely reflected the lower tax rates and the increased standard deduction brought about by the new law. This generally meant taxpayers had less tax withheld in 2018 and saw more in their paychecks,” according to an IRS release.
Third, according to the IRS, “(w)ithholding tables couldn’t fully factor in other changes, such as the suspension of dependency exemptions and reduced itemized deductions,” according to the IRS. “As a result, some taxpayers could have paid too little tax during the year, if they did not submit a properly-revised W-4 withholding form to their employer or increase their estimated tax payments.”
Fourth, in January 2019, the IRS provided for a penalty waiver as temporary relief to help “taxpayers who inadvertently didn’t have enough tax withheld.” At the time, the IRS waived the penalty for any “taxpayer who paid at least 85 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two.” The usual percentage threshold is 90 percent.
Fifth, importantly, on March 22, 2019, the IRS...
from Business https://www.ctpost.com/business/article/Julie-Jason-An-update-on-insufficient-tax-13727881.php
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