The Association for Main Street
Accountants and Tax Professionals.

IRS Under withholding Penalties

IRS Waives Penalties for Under
Withholding and Estimated Payments

Taxpayer Must Have Paid 85 Percent of Liability

IR-2019-03 -- WASHINGTON -- The Internal Revenue Service announced on January 15 that it is waiving the estimated tax penalty for many taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.

The IRS is generally waiving the penalty for any taxpayer who paid at least 85 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. The usual percentage threshold is 90 percent to avoid a penalty. The waiver computation announced today will be integrated into commercially-available tax software and reflected in the forthcoming revision of Form 2210 and instructions.

This relief is designed to help taxpayers who were unable to properly adjust their withholding and estimated tax payments to reflect an array of changes under the Tax Cuts and Jobs Act (TCJA), the far reaching tax reform law enacted in December 2017.

“We realize there were many changes that affected people last year, and this penalty waiver will help taxpayers who inadvertently didn’t have enough tax withheld,” said IRS Commissioner Chuck Rettig. “We urge people to check their withholding again this year to make sure they are having the right amount of tax withheld for 2019.”

The updated federal tax withholding tables, released in early 2018, largely reflected the lower tax rates and the increased standard deduction brought about by the new law. This generally meant taxpayers had less tax withheld in 2018 and saw more in their paychecks. However, the withholding tables couldn’t fully factor in other changes, such as the suspension of dependency exemptions and reduced itemized deductions.

As a result, some taxpayers could have paid too little tax during the year, if they did not submit a properly-revised W-4 withholding form to their employer or increase their estimated tax payments. The IRS and partner groups conducted an extensive outreach and education campaign throughout 2018 to encourage taxpayers to do a “Paycheck Checkup” to avoid a situation where they had too much or too little tax withheld when they file their tax returns.

Although most 2018 tax filers are still expected to get refunds, some taxpayers will unexpectedly owe additional tax when they file their returns. Read More

Related Information: IRS Notice 2019-11

IRS Recalls 46,000 Workers for Tax Season
by Michael Cohn, Accounting Today

January 15, 2019 -- The Treasury Department released a revised shutdown contingency plan on January 15 calling for more than 46,000 Internal Revenue Service employees to return to work to get ready for tax filing season, but the majority of them will be unpaid until the partial government shutdown ends.

Under the previous contingency plan that has been in place since the shutdown began on Dec. 22, 88 percent of the IRS’s 80,000 employees had been sent home without pay. Under the new filing season plan released Tuesday, 46,052 employees will be back on the job starting this week; 42.6 percent of the workforce will remain furloughed.

Last week, the IRS announced that tax refunds would be processed as usual once tax season begins on Jan. 28, even if the shutdown lasts until then, and said it would be recalling a “significant portion” of its furloughed employees (see Tax season to start Jan. 28, IRS confirms).

Since then, the IRS has brought back approximately 400 furloughed employees to process income verification forms for mortgage applications, but they are being paid out of the user fees for the applications (see IRS reopens income verification service despite shutdown).  Read More
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