As I have alluded to over the previous year, the new tax bill has some distinct flaws. One of them is that many companies, including the federal government, did not withhold the proper taxes from paychecks. While this may not seem like a huge error, it can create hardships in many people’s lives, one, they may be expecting a refund when in fact they will owe taxes due to the shortfall in withholdings. And second, in many instances, the IRS would normally impose underpayment penalties.
While it is too late to do much of anything about not having enough taxes withheld from your paycheck the good news is the IRS will not penalize people for most underpayments. Normally, if you did not pay enough in taxes, the IRS would impose small penalties to encourage people to have more withheld or to make quarterly payments to avoid such underpayments. For the tax year 2018 the IRS has stated that provided a taxpayer has paid at least 85% of what they owe through withholdings or quarterly payments no penalties will be imposed.
This is due to the tax bill passed late in 2017 and with the increase of the standard deductions it caused some issues with company withholdings as salaried employees pay their taxes through payroll deductions, they may or may not owe come mid-April. People who are contractors or self-employed should have made their quarterly payments to the IRS in place of withholdings. In either case, any funds due to the IRS are due by April 15, 2019.
If you need any assistance with your 2018 taxes or would like me to prepare them for you, please do not hesitate to contact me directly.