We have welcome news for all 2018 taxpayers who did not avail waiver for their income tax penalties in the last tax cycle. The IRS has announced that it will automatically waive the tax penalties of eligible taxpayers who did not claim it themselves while filing 2018 federal income tax returns.
So, if you are one of these 4,00,000 taxpayers, then you are in for a treat. IRS will credit your tax account with the waived amount automatically, and you don’t even need to contact them or apply for it separately.
Not sure if you are eligible for this penalty waiver? Let this article enlighten you.
The current rate of penalty which is applicable for default on the payment of taxes, due to the shortage of withholding amount and estimated tax payments, is 80%. Early in the year, the rate used to be 90% which was reduced by the IRS to help taxpayers clear their dues easily and timely.
IRS has also removed the requirement of paying estimated tax payments in four equal installments in a tax year. In the case of the 2018 income tax payments, they had put the cap as 15th January 2019 as the last date to pay all the due amount.
Does this penalty waiver apply to you?
You would be eligible for this tax penalty waiver if you have paid at least 80 percent of your 2018 tax liabilities using your tax withholdings and estimated tax payments. So, you will be receiving this waived off amount in your tax account if you had not applied for it while filing your 2018 federal income tax returns.
Does the waiver require an application to receive it?
No, you do not need to apply for this waiver or contact IRS separately. If you are eligible for this tax penalty waiver then, you would be receiving the notice CP 21 from IRS within the next few months. If you have already paid the penalty, even then you can expect to receive a refund check after three weeks of receiving such a notice.
Can you claim the tax penalty waiver even if you have not filed my 2018 tax returns?
Yes, you can apply for this waiver while filing your 2018 federal income tax returns which should be due for payment on 15th October 2019. You can either pay your 2018 tax returns electronically or on paper. If you pay it electronically, then you can use the in-built waiver computation tool of the tax software package to get an estimate of your waiver. If you plan on filing your returns on paper, then you shall make it a point to attach the Form 2210 while filing your 2018 tax returns.
Point to keep in mind for a less taxing future
Plan your tax payments prudently: You need to make it a point to use your tax withholdings, pension payments or social security benefits, or make estimated tax payments or a combination of these to pay your income tax on time. The U.S. tax system works on the principle of pay-as-you-go and requires the payment of taxes during the year rather than the end at one go. So, planning your tax payment options prudently is very important.
Use the Withholding Calculator to know your estimated tax withholdings: It is critical to ensure that the correct tax withholding amount is being deducted from your salary on a monthly basis. An incorrect estimation of the withholding amount, where the taxpayer pays an amount lesser than his/her actual liabilities, leads to a default on tax payments. Using the withholding calculator, you can ascertain the exact amount of your income tax withholdings and use this knowledge to make informed tax payment decisions.
The notification of a penalty waiver is a piece of good news for all eligible taxpayers. It is an excellent initiative that IRS is waiving off and refunding this penalty amount automatically to your tax accounts. But, this calls for a need to plan your taxes better in the coming year and make informed tax decisions. Doing so, you can save yourself from such heavy tax default penalties and decrease your tax liabilities.
Reference Article: https://www.irs.gov/newsroom/irs-automatically-waives-estimated-tax-penalty-for-eligible-2018-tax-filers