VIEWpoint Issue 2 | 2018
Tax Cuts and Jobs Act – Highlights of What is Ahead for You...
VIEWpoint Issue 3 | 2017
Overview of the Business Valuation Process
Three Questions You May Have After You File Your Return
How Long Should You Keep Your Tax Returns on File?
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 penalty’s usual safe harbor.
Most taxpayers must pay most of their tax obligation during the year, typically by one of two ways, including:
1. Having tax withheld from paychecks and other income.
2. 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 doesn’t apply.
Safe harbor is met when the person’s tax payments were at least 90 percent of the liability for the year or were at least 100 percent of the prior year’s liability.
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:
To help taxpayers get their withholding right, the IRS has updated its online withholding calculator.
For more information on how this penalty waiver may apply to you, contact Doeren Mayhew’s tax advisors today.
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