Trump administration expands penalty relief for Americans who underpaid taxes
The Internal Revenue Service (IRS Opens a New Window. ) is waiving the underpayment penalty for more Americans who may have unintentionally underpaid their 2018 tax Opens a New Window. liabilities.
The Department of Treasury announced on Friday that it was lowering the withholding underpayment threshold to 80 percent – meaning people whose total withholding and estimated tax payments for 2018 are equal to or greater than 80 percent of their taxes owed will not be penalized.
“Treasury is exempting even more taxpayers from the usual underpayment penalties in an effort to help those who attempted in good faith to meet their withholding obligations,” Treasury Secretary Steven Mnuchin said in a statement.
During any given year, taxpayers can avoid the underpayment penalty if they paid withholding and estimated tax of at least 90 percent of the amount owed.
The tax agency had previously expanded relief in January to cover individuals whose total withholding and estimated tax payments were at least 85 percent of the taxes owed.
The reason for the relief is because calculations were more likely to be inaccurate as a result of the new tax law and withholding tables. A growing number of lawmakers were pushing for the administration to expand penalty relief.
Throughout the year, the IRS and the Treasury urged Americans to check their withholding amounts, even providing an online calculator to do so.
While the majority of Americans are expected to receive a net tax benefit as a result of the new law, some have been surprised by smaller refund amounts, while others even owe the agency for the first time. The Treasury Department has continually cautioned that the size of a person’s refund is separate from whether his tax liability increased or decreased.
About 75.8 million returns have been received by the agency, while 73.5 million have been processed.
The IRS has already started urging taxpayers to check their withholding for next year.