Many Americans failed to withhold the proper amount of taxes this year due to confusion over new tax laws but now, as the deadline to file approaches, the IRS is announcing penalty waivers for even more people who underpaid.
The IRS recently announced it would not penalize people who under-withheld, so long as they paid 80 percent of due taxes. The threshold was lowered from the original 90 percent announced earlier, which expands the forgiveness to an additional 15 percent of taxpayers.
Misty Little, an enrolled agent at Burkhart and Stevens in San Luis Obispo, said this tax season has been a challenging one.
“A lot of people are finding that they are drastically under-withheld and it’s a surprise to them because a lot of people think they’re getting a refund but they’ve gotten that on their paychecks throughout the year,” Little said. “So it’s been an interesting tax season.”
Little’s office has completed about 450 tax returns so far, she said, and they expect to file an additional 300 before the April 15 filing deadline.
The U.S. Tax Policy Center finds 90 percent of middle-class Americans had fewer taxes withheld from their paycheck in 2018, which plumped up paychecks an average of $48 every two weeks. That extra money upfront means at best a lower tax return, which is on average $186 lower than tax time last year, and at worst– taxes owed.
Penalties are charged to those who did not withhold enough, but Little said those fines can be abated for anyone who files a form 843. The only stipulation, Little said, is that the form cannot be filed more than once over a 3-year period.
While most people are focused on submitting this year’s tax returns, tax preparers say now is the time to start planning for next year.
