The IRS Will Waive Some Penalties for Tax Underpayments
Taxpayers that don’t withhold and make estimated tax payments equal to 110% of the prior year tax or 90% of the current year tax are subject to Federal tax penalties. The IRS is not going to assess a penalty for individuals who have paid in at least 85% of their current year tax for the 2018 tax year. The Tax Cuts and Jobs Act adjusted the 2018 withholding tables, this adjustment reduced the withholding and may cause taxpayers to be under paid. Taxpayers saw more money in their paychecks starting in February 2018, which should account for the reduction in tax rates but not everyone will see a reduction in tax rates equal to the reduction in withholding.
According to the IRS some taxpayers will have a larger income tax bill in 2018 because of the reduced payroll withholding. It is difficult to determine how the numerous tax law changes will affect each taxpayer, putting them at risk of underpayment penalties. It is estimated that 30 million taxpayers will owe money with their 2018 personal income tax returns.
Taxpayers will need to remember the decrease in withholding that occurred in 2018 to understand the change in their tax refund or payment due. Please contact us here or call 513-241-8313 to speak with a member of the Barnes Dennig team for any questions regarding your tax situation.