LR Tax & Accounting Services is pleased to inform you all that the Internal Revenue Service is automatically waiving the estimated tax penalty for the more than 400,000 eligible taxpayers who already filed their 2018 federal income tax returns but did not claim the waiver.
The IRS will apply this waiver to tax accounts of all eligible taxpayers, so there is no need to contact the IRS to apply for or request the waiver.
Earlier in the year, the IRS lowered the usual 90% penalty threshold to 80% to help those whose withholding and estimated tax payments fell short of their total 2018 tax liability.
The agency also removed the requirement that estimated tax payments be paid in four equal installments, as long as they were all made by January 15, 2019. The 90% threshold was initially lowered to 85% on January 16 and further lowered to 80% on March 22.
This automatic waiver will apply to any individuals who paid at least 80% of their total tax liability through federal income tax withholding or quarterly estimated tax payments but did not claim the special waiver available to them when they filed their 2018 return earlier this year.
Over the next few months the IRS plans to mail copies of notices CP 21 granting this relief to those affected. Any eligible taxpayer who already paid the penalty will also receive a refund check about three weeks after their CP21 notice regardless if they requested penalty relief.
The agency emphasized that eligible taxpayers who have already filed a 2018 return do not need to request penalty relief, contact the IRS or take any other action to receive this relief.
For those yet to file, the IRS urges every eligible taxpayer to claim the waiver on their return. This includes those with tax-filing extensions due to run out on Oct. 15, 2019. The quickest and easiest way is to file electronically and take advantage of the waiver computation built into their tax software package. Those who choose to file on paper can fill out Form 2210 and attach it to their 2018 return. See the instructions to Form 2210 for details.
Because the U.S. tax system is pay-as-you-go, taxpayers are required by law to pay most of their tax obligation during the year, rather than at the end of the year. This can be done by having tax withheld from paychecks, pension payments or Social Security benefits, making estimated tax payments or a combination of these methods.
Similar to last year, the IRS urges everyone to do a Paycheck checkup and review their withholding for 2019.
Please remember that LR Tax & Accounting Services, Inc. is always here to help with any questions and concerns. We offer tax planning, tax resolution, tax returns for individuals and business, accounting, payroll and bookkeeping. Please contact us today to get a quote or ask a question!
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