IRS Expands Penalty Waiver for Underpayments of 2018 Federal Tax Liabilities by Jeffrey M. Mutnik, CPA/PFS

Posted on April 02, 2019

In response to a chorus of concerned taxpayers and tax preparers, the IRS is providing additional penalty relief to taxpayers who have found that they did not pay enough in federal taxes in 2018 through W-2 withholding, quarterly estimated tax payments or a combination of the two.

Effective immediately, individual taxpayers, trusts and estates that paid at least 80 percent of their total tax liabilities during 2018 will escape penalties when filing their tax returns before the 2019 deadlines. In January, the IRS first lowered the penalty percentage threshold from 90 percent to 85 percent. Individuals who already filed their tax returns for 2018 but qualify for this expanded relief may claim a refund by filing on paper IRS Form 843, Claim for Refund and Request for Abatement, and include the statement “80% Waiver of estimated tax penalty” on Line 7. This form cannot be filed electronically.

Generally, the U.S.’s pay-as-you-go tax system requires taxpayers to pay at least 90 percent of their tax obligations during the year, as they earn income, or risk an underpayment penalty and interest on the unpaid amount. However, many taxpayers who took home larger paychecks in 2018, thanks to the new tax law, are now finding that they owe the government money because the IRS withholding tables did not reflect all of the changes contained in the new law.

To avoid an unexpected tax bill in future years, taxpayers should meet with their advisors and accountants during the first half of 2019 to confirm the accuracy of their estimated tax payments and to check the withholding on their most recent paychecks to ensure they are having enough tax withheld from their wages based on their filing status, number of dependents and other factors.

About the Author: Jeffrey M. Mutnik, CPA/PFS, is a director with the Taxation and Financial Services practice of Berkowitz Pollack Brant Advisors and Accountants, where he provides tax and estate-planning counsel to high-net-worth families, closely held businesses and professional services firms. He can be reached in the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via email at