The Internal Revenue Service (IRS) recently expanded the penalty relief for taxpayers who owe taxes for the 2018 tax year. In the past, the agency would charge a penalty on taxpayers who failed to pay at least 90 percent of their tax obligation during the tax year. Employers generally take these tax payments as withholdings from the taxpayers’ paychecks paid directly to the IRS.
This year, the agency announced it will relax its requirement and lower the expected payment to 80 percent of the taxpayers’ tax obligation.
What does this mean? The agency will still require taxpayers to pay the bulk of their tax obligations throughout the tax year. Essentially this means if a taxpayer was expected to pay $30,000 in taxes in 2018, the IRS will expect the taxpayer pay at least $24,000 as opposed to $27,000 in installments throughout the year. If not, the taxpayer would not only have to pay off the tax bill this April, but also face additional penalties from the IRS.
Why the change? The agency states it received many complaints from taxpayers who did not change their withholdings enough to adjust for the new tax laws that went into effect for the 2018 tax year.
Unfortunately, even with the eased penalties, taxpayers may find themselves facing an unexpected tax bill. As noted in a previous post, available here, there are options for taxpayers that cannot pay their tax bill.
What if I already filed may taxes and paid the fine? If you paid a fine based on the previous 90 percent threshold, the IRS will allow a refund. File a Form 843, Claim for Refund. Within this form, you request an abatement with a statement that the abatement is the result of the 80 percent waiver of the estimated tax penalty.