The Internal Revenue Service advised individuals whose 2018 federal income tax withholding unexpectedly falls short of their tax liability for the year, that you can still avoid a tax-time surprise by making a quarterly estimated tax payment. The deadline for making a payment for the fourth quarter of 2018 is Tuesday, Jan. 15, 2019.
Although the Tax Cuts and Jobs Act (TCJA) lowered tax rates for most people, it also nearly doubled the standard deduction and limited or discontinued many deductions. Though most 2018 tax filers are still expected to get refunds, the number who owe tax, and in some cases a penalty, is likely to be larger than in recent years, and many of them are likely to be people who have always gotten refunds.
Those of you who itemized in the past who now choose to take advantage of the increased standard deduction, as well as two-wage-earner households, employees with non-wage sources of income and those with complex tax situations, are at most risk of having too little tax withheld from their pay. This is especially true if they didn’t update their withholding earlier this year.
In addition, various financial transactions, especially those occurring late in the year, can often have an unexpected tax impact. Examples include year-end and holiday bonuses, stock dividends, capital gain distributions from mutual funds and stocks, bonds, real estate or other property sold at a profit.