If you read our article on tax withholding changes near the end of 2018, you already knew that there would be a bit of uncertainty surrounding this year’s filing. Some citizens were on track to receive a “tax time surprise,” in which they owed more than they would have originally thought, thanks to new laws being put into effect. Recently, however, the Treasury Department has announced a bit of leniency.
Here are the details:
Normally, salaried employees are required to have their taxes withheld during each paycheck; and business owners pay estimated taxes after each quarter. Filling out the Form 1040 signals to the IRS that you have finalized paying any dues to the government, and opens your account up to an oversight. If payments haven’t been completed by the April 15 deadline and the taxpayer in question has not filed for an extension, a penalty is then issued.
However, we may be in luck. Taxpayers who may have miscalculated or underpaid their contribution to federal taxes this year may not be in as much trouble as originally expected. The government now asserts that individuals who paid at least 85% of the money owed through withholding or quarterly payments will not be penalized under new standards put into place to alleviate some of the pressure and confusion surrounding all of the regulatory changes that have been enacted this year.
The adjustment in standards comes after Senator Chuck Grassley recently took to the floor to urge the Internal Revenue Service to step back enforcement of underwithholding due to the passage of tax reform. “The IRS should consider what action the agency can take to provide penalty relief,” Grassley said. In a joint bipartisan effort headed by him and Ron Wyden, Congress voiced citizen concerns regarding missteps rooted in changes resulting from the new tax overhaul.
There are too many laws in the new tax reform to be able to cover in just one article. The best choice for regulatory success is to hire an accounting professional. If you would like to make sure your business is on the right track this tax season, we’d love to get in touch. For more information on other financial topics, check out our blog.