IRS Offers Penalty Relief to Ease Reform Transition

In order to make this first filing season under the recent tax reform somewhat less painful, the IRS offered a modicum of relief to taxpayers on January 16, 2019. The IRS announced that, for taxpayers who had withholdings and/or made estimated tax payments equal in amount to at least 85% of the tax reported on their 2018 tax return, it will waive underpayment penalties (IRC §6654 penalties).

According to the General Accounting Office, significant changes under the new law are projected to cause millions of taxpayers to owe more in taxes than they have previously-and it is likely that many taxpayers are still unprepared this year. Employers were not even provided with the updated withholding tables until mid-January of 2018, delaying the corresponding adjustments for many employees until mid-February. Other taxpayers will be adjusting to caps on state and local tax deductions, or facing the reality of the elimination of unreimbursed employee expenses for the first time.

Taxpayers should request this temporary penalty relief using Form 2210, Underpayment of Estimated Tax By Individuals, Estates, and Trusts, which should accompany the filing of their 2018 returns.

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