Taxpayers May Qualify For 2018 Estimated Tax Penalty Waiver
The Internal Revenue Service (IRS) announced it is waiving estimated tax penalties for some taxpayers. The penalty waiver applies to taxpayers whose 2018 estimated tax payments did not meet the penaltyâ€™s usual safe harbor.
Estimated Tax Penalty
Most taxpayers must pay most of their tax obligation during the year, typically by one of two ways, including:
1.Â Having tax withheld from paychecks and other income.
2.Â Making estimated tax payments.
Generally, a penalty applies at tax filing when the taxpayer has paid too little during the year. However, if the taxpayer meets the safe harbor, then the penalty doesnâ€™t apply.
Safe harbor is met when the personâ€™s tax payments were at least 90 percent of the liability for the year or were at least 100 percent of the prior yearâ€™s liability.
2018 Penalty Waiver
With the change to the safe harbor for 2018 tax payments, the IRS will waive the penalty for any taxpayer who prepaid at least 85 percent of their total tax liability for 2018. Taxpayers who did not prepay less than 85 percent are not eligible for the waiver. The IRS will calculate their penalty using the 90-percent threshold.
Form 2210 and its instructions will be updated accordingly, as well as integrating the new penalty computation into commercially available software.
Every year, especially this year with tax reform changes, the IRS urges everyone to check their withholdings for 2019.
You may be at risk of having too little tax withheld from your pay if you have any of the following circumstances:
Itemized in the past, but now take the increased standard deduction.