In 2018, the federal tax withholding tables changed because of lower individual tax rates in the Tax Cuts and Jobs Act. As a result, individuals received larger paychecks because of the lower rates. A downfall of this was individuals potentially not withholding enough taxes to cover their tax bill in April and being subject to underpayment penalties.
As a result, the IRS recently announced that they are waiving the penalty for taxpayers who paid at least 80 percent of their tax liability for 2018. This announcement will only apply to the 2018 tax year. Prior to this announcement, taxpayers needed to pay at least 90 percent of their taxes. This change will be extremely beneficial to taxpayers that would normally be subject to penalties, and will take some of the sting out of a tax bill in April. If your return has already been filed and was subject to penalties, you may be able to file Form 843 to claim the refund.
As a reminder, please check your W-4 to ensure proper payroll withholdings to avoid underpayment issues in future years.
Wednesday, April 24, 2019 | 7:30 AM – 9:30 AM EDT | The Hartford Club