News

IRS Waives Underpayment Penalty…….Sort of

Although tax returns are not due until after year end, payment of tax is actually due to be paid thorough the year.  This is done either through withholding in your paycheck, or by making estimated tax payments.  If the payments are not made in the proper amounts during the year there is an estimated tax penalty.  To avoid the penalty, taxpayers must have correctly paid in 90% of the tax by the time the tax return is due, without extensions.  For 2018, due to the uncertain effects of the new tax laws and rates, the IRS has announced that they are waiving this penalty.  However, it’s not quite as good as it sounds.  While the headlines may read that the penalty was waived, it is only waived for people who have paid in 85%, rather than 90%.  Therefore, the IRS is only waiving the penalty if your estimated tax payments or withholdings were off by 5% or less.  Furthermore, due to certain waivers of the penalty for small underpayments, it is hard to imagine many middle to low income taxpayers will even fit this category.  In the end, any relief is always welcome, but with the uncertainty of the Tax Cuts and Jobs Act, the IRS probably could have gone farther than overselling this very small assistance.

Disclaimer: Hone Maxwell LLP articles and blogs are not intended as legal advice. Additional facts, facts specific to your situation or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information herein.

Latest Post

SAN FRANCISCO

870 Market St., Suite 588
San Francisco, CA 94102
415.765.1754

SAN DIEGO 

3465 Camino Del Rio South, Suite 400
San Diego, CA 92108
619.980.4476

IRVINE

4 Venture, Suite 320
Irvine, CA 92618
949.838.7807

TIJUANA

Centro Corporativo Dayco
Blvd. General Gustavo Salinas #11050
Suite 602, Col. Aviacion
22014 Tijuana, B.C., Mexico
+52 (664) 504 6415

Newsletter Signup

Stay updated on the latest tax laws.