There is good news for anyone who fell short on their 2018 federal income tax payments. The IRS recently announced that it is waiving the tax penalty for taxpayers who have paid at least 85% of their tax bill. This is in contrast to the normal 90% payment requirement. The change is allowed because of the far reaching impacts of the TCJA which was enacted in December 2017.
In its first year, many taxpayers were caught unaware of the impact the TCJA would have to their bottom line. Tips to avoid the same pitfall in future years include adjusting your paycheck withholding. Various guides are available to help assist with W4 witholdings. On our blog “W-4s & You: How Much to Withhold and the IRS website can help you plan for future years.
Two of the TCJA changes that have had the greatest impact on taxpayers are the elimination of exemptions for dependents and of most itemized deductions. For taxpayers who have depended greatly on these types of claims in the past, there is a greater risk of having not enough tax withheld from pay. The IRS is finding that other high risk categories include two wage earner families, employees with non-wage sources of income, and anyone with complexities to their tax situation. For more information from the IRS on this decision and how it may impact you, their website provides good details. If you would like more information on changes brought about by the TCJA, our blog shares lots of information. For assistance budgeting and planning for future tax season, ITP Taxes is happy to help!