Women and Social Security

This month, we’ve assemble resources to educate women about Social Security, a key component of your retirement planning!

 

IRS Waives Penalty for Many Whose Tax Withholding and Estimated Tax Payments Fell Short in 2018

The Internal Revenue Service announced that it is waiving the estimated tax penalty for many taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.

The IRS is generally waiving the penalty for any taxpayer who paid at least 85 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. The usual percentage threshold is 90 percent?to avoid a penalty.

The waiver computation will be integrated into commercially-available tax software and reflected in Form 2210 and instructions.

This?relief is designed to help taxpayers who were unable to?properly adjust their withholding and estimated tax payments to reflect an array of changes?under?the?Tax Cuts and Jobs Act (TCJA), the far-reaching?tax reform law?enacted?in?December?2017.?

“We realize there were many changes that affected people last year, and this penalty waiver will help taxpayers who inadvertently didn’t have enough tax withheld,” said IRS Commissioner Chuck Rettig. “We urge people to check their withholding again this year to make sure they are having the right amount of tax withheld for 2019.”

The?updated federal?tax withholding?tables, released in early 2018,?largely reflected the?lower?tax rates and the increased?standard deduction brought about by the?new?law. This generally meant taxpayers had less tax withheld in 2018 and saw more in their paychecks.?

However,?the withholding tables?couldn’t fully factor in other changes, such as the suspension of dependency exemptions and reduced itemized deductions. As a result, some taxpayers could have paid too little tax during the year,?if they did not submit a properly-revised?W-4 withholding form?to their employer or increase their estimated tax payments. The IRS and partner groups conducted an extensive outreach and education campaign throughout 2018 to encourage taxpayers to do a “Paycheck Checkup” to avoid a situation where they had too much or too little tax withheld when they file their tax returns.?

Although most?2018 tax filers are still expected to get refunds, some taxpayers will unexpectedly owe additional tax when they file their returns.

Why is Your Tax Refund Smaller in 2018?

Originally published on www.masslive.com

Is your tax refund smaller this year?

You?re not alone. As of Feb. 1, the IRS had issued 4.67 million refunds this year, compared to 6.17 million at the same time last year. The average refund was $1,865, down from $2,035.

But tax experts say, most people are still paying less in taxes compared to last year.

How is that possible?

The Republican/MassLive.com talked to two certified public accountants ? John Kilcoyne, a partner at Solar & Kilcoyne in Leominster, and Andrew Schwartz, a founder of Schwartz & Schwartz in Woburn ? to understand what is going on.

?All things being equal, the rates were a little less, taxes did go down a little bit, but unfortunately refunds went down,? Kilcoyne said

The root of the change is in the federal tax overhaul that Congress passed in December 2017.

The bill reduced the tax rate for most taxpayers. So the IRS wrote new withholding tables, which give guidance to employers on how much money to withhold from workers? paychecks.

For most people, the amount of their withholding went down, so they received more take-home pay each time they got a paycheck.

A refund is given when someone pays the government more during the year than they actually owe in taxes, so the government returns the extra money. In this case, the amount employers were withholding based on the new tables tended to be closer to the amount people actually owed. So at the end of the year, the government did not owe as much in refunds. In some cases, the taxpayer might have owed a bit more.

?They reduced the withholding by a little bit more than they should have been reduced by, in hindsight,? Schwartz said.

Schwartz said the most important number for people to look at is not the size of their refund, but their total tax liability for the year ? which in most cases went down.

Kilcoyne said most accounting firms try to notify customers when there is a big change in federal tax law, and this one was in the news.

?It was not a total surprise or total shock unless you had your head in the ground for 12 months,? Kilcoyne said.

But Kilcoyne noted that people often do not question when they are seeing a slight increase in their take-home pay, and many taxpayers were not aware of what it would mean in February, March or April when they get their refunds.

As is the case with any tax change, each person?s personal circumstance is different. Some taxpayers could see their total tax payments increase, based on changes that Congress made to deductions. Others may see no difference.