The new Tax Cuts and Jobs Acts was the largest tax overhaul since 1986. Check out my other posts for more detailed information on the new law. In response to this new tax law, the IRS issued a new Form W-4, Employee's Withholding Allowance Certificate, and updated the withholding calculator that was released February 28, 2018. This significantly reduced taxpayer's Federal withholding. Everyone should saw a little extra ching in their paychecks. Yeah! However, now the tax man is here. If you didn't estimate your tax liability correctly throughout the year or if your estimated tax payments were made based on federal withholding from your paychecks in 2017, you could be underpaid and have underpayment penalties due. Oh No!! Well have not fear, there is help on the way.
In prior years, a taxpayer was assessed an underpayment penalty if they did not meet "safe harbor". What does "safe harbor" mean? What is means is you are required to pay the lesser of 90% of the current year tax or 100% of the prior year tax (110% if your prior Adjusted Gross Income over $150,000). The IRS has issued Notice 2019-11 that changes the 90% of current year tax requirement down to 85% for estimates and withholding due by January 15, 2019 (Ummm, Barb your posting this on January 21, 2019 thanks for the advanced warning...Uhhhh sorry). This waiver is not automatic. To get this reduction, the IRS is requiring the taxpayer to complete Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, check the box Part II, Box A and include a statement "85% waiver" when filing their Form 1040, US Individual Income Tax Return. See the picture below.
If neither waiver applies, then you are subject to the underpayment penalties and interested as usual. I would suggest filing your return as quickly as possible.
Please feel free to contact me should you have any questions. Barb@calc-you-later.com
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