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IRS Lowered the 2019 Tax Penalty

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    Why the IRS Just Cut Taxpayers Some Slack

    Since all the changes to the tax code are happening from 2017 to 2018, the IRS decided to lessen the penalty on underpaying your taxes, either through withholding or estimated tax payments throughout the year.

    The standard rule is if you ended up paying less than 90% of your tax burden through either of these 2 methods, you had to pay an underpayment penalty. Since the tax code changed so dramatically for 2018 filing (what you will file in 2019+), they cut it to 85%. ---

    What the IRS did to lessen the penalty

    The IRS has always given taxpayers some leeway in underpaying tax without owing a penalty. If your ending tax bill on your return is less than $1,000, then no penalty applies. In addition, if you've paid at least 90% of your tax for the year either through withholding or timely estimated tax payments, then there won't be a penalty.

    The latest action from the IRS centers on that 90% requirement. For purposes of waiving the penalty, the IRS reduced that 90% figure to 85%. That'll give you a bit more room to have underpaid your taxes without facing the penalty.

    IRS Commissioner Chuck Rettig explained the move. "We realize there were many changes that affected people last year," Rettig said, "and this penalty waiver will help taxpayers who inadvertently didn't have enough tax withheld."

    So hopefully that alleviates stress for at least some of us.

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    Seems to check out. I was off on my estimated taxes as an independent contractor around that amount, like I was last year, and the late filing penalties were at least less this year than last. Both years it hasn't been too much. But definitely helped to see it lower.
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    I could have used this leeway a few years ago, but fortunately I estimated my taxes fairly accurately this year and don't have to worry about any penalties. Hopefully they will just keep this rule around for the time being just in case I don't estimate accurately in the future!
Categories: Tax Penalties