When the Tax Cuts and Jobs Act of 2017 passed, it made a number of changes to the current tax laws. As many taxpayers discovered, this included changes to the current withholding tables for federal income tax, As a result, many people found that they had under-withheld for their taxes this past year.
If you fall into that group, you may be in luck. The IRS announced on January 16 that it would waive the usual tax penalties for individuals who under-withheld on their taxes, as long as they had paid at least 85 percent of the total amount of taxes they owed. Typically, the required number is 90 percent.
The announcement came after a finding by the Government Accountability Office that as many as 30 million U.S. taxpayers may have under-withheld on their income taxes this year.
The 2017 overhaul of the current tax laws meant that many taxpayers had their taxes lowered and ended up withholding less of their income in their paychecks. As a result, taxpayers who didn’t revise their W-4 forms may have ended up under-withholding for the year.
Taxpayers should keep in mind that if they paid less than 85 percent of their tax liability, they are not eligible for the waiver and will need to pay the associated penalties.
If you were not able to adjust your tax withholdings in order to keep pace with the changes introduced by the Tax Cuts and Jobs Act, you should plan to do that for the coming tax year to ensure that you are not penalized in the future. If you want to be sure that you are withholding the correct amount, you can check by using the Withholding Calculator on the IRS’s website.
Do you want to make sure you’re reporting your earnings correctly? The Royce CPA Firm can help. Contact us today to set up a tax appointment at our Tucson office.