If you faced a surprise penalty for coming up short on your 2018 taxes, the IRS might be giving you some relief.
On Wednesday, the IRS said it would automatically waive the tax underpayment penalty for more than 400,000 taxpayers who have already submitted their 2018 federal income tax return and failed to claim a special penalty waiver this spring.
The waiver is only of the penalty; if you owed taxes, you must pay them.
Normally, you must pay at least 90% of the income taxes you owe for a given year, or 100% of the tax liability from the prior year before you actually file, to avoid an underpayment penalty on your tax return. The threshold is 110% if your adjusted gross income on that year’s return exceeded $150,000.
The Tax Cuts and Jobs Act overhauled the tax code, slashing individual income tax rates, eliminating personal exemptions and roughly doubling the standard deduction. As a result, not all taxpayers were properly withheld for 2018.
To help taxpayers contend with these changes amid the 2018 filing season, the IRS lowered its 90% threshold to 85% in January and to 80% in March.
This change was only applicable for the 2018 tax year.
The new automatic waiver announced on Wednesday would apply to filers who paid at least 80% of their total tax liability for 2018 — and who failed to claim a special waiver when they originally submitted their return.
“The IRS is taking this step to help affected taxpayers,” said IRS commissioner Charles Rettig in a statement.
“This waiver is designed to provide relief to any person who filed too early to take advantage of the waiver or was unaware of it when they filed.”
For the 2018 tax filing season, the average penalty was around $180, according to IRS data through May 23.
What to expect
The IRS will send the eligible taxpayers a notice in the mail, notifying them of the automatic waiver. You don’t need to contact the taxman in order to obtain it.
If you already paid the penalty, you’ll receive a refund check about three weeks after the IRS mails you the notification.
Avoid the guesswork next year by nailing down your 2019 tax withholding.
The IRS recently launched its new tax withholding estimator, a tool that helps you figure out the amount of federal income tax pulled from your paycheck.
Tailoring the amount of income taxes withheld from your pay can make the difference between being overwithheld and receiving a large refund — or being far underwithheld and owing the taxman…..Read More>>