The IRS once again is making it easier on taxpayers facing unexpected penalties following implementation of the Tax Cuts and Jobs Act.
Individuals who failed to pay a certain percentage of their federal tax bill throughout the year are subject to an underpayment penalty when they file.
On Friday, the agency said it is lowering that threshold to 80 percent of what they owe, after previously reducing the figure to 85 percent in January. The move is expected to provide relief to an additional 15 percent of all taxpayers and applies only to tax year 2018.
Eligible payers who have already filed and paid the penalty can claim a refund by filling out IRS Form 843. That has to be done via old-fashioned snail mail only.
Before the tax code overhaul, anywhere from 10 million to 12 million taxpayers found themselves facing a penalty, said a senior Treasury official. In 2017, the total amount collected was $1.6 billion in penalties.
Normally, in order to avoid a penalty for underpayment, you have to pay at least 90 percent of what you owe for the tax year in question or 100 percent of the tax liability from the prior year (or 110 percent if your adjusted gross income on that year’s return exceeded $150,000).
The IRS has been reminding taxpayers to review their W-4s, to ensure they are withholding sufficient taxes from their pay.
That’s because the Treasury Department and the IRS updated their withholding tables in early 2018 to reflect the changes from the new tax law. The overhaul of the tax code slashed individual income tax rates, doubled the standard deduction and eliminated personal exemptions.
“We heard the concerns from taxpayers and others in the tax community, and we made this adjustment in an effort to be responsive to a unique scenario this year,” said IRS Commissioner Chuck Rettig in a statement.
“The expanded penalty waiver will help many taxpayers who didn’t have enough tax withheld. We continue to urge people to check their withholding again this year to make sure they are having the right amount of tax withheld for 2019,” the commissioner said.
The withholding tables are guidelines your employer follows in order to deduct the appropriate amount of income taxes from your paycheck. You can also use your W-4 to tailor the taxes withheld from your pay.
If not enough is withheld, you’ll owe money come tax time. Pay too much, and you end up with a large refund.
(Courtesy of CBNC.com)