IRS lowers withholding threshold for 2018

[GalaxyBoy]

IRS announced that to avoid a penalty, the threshold for 2018 withholding will be 85% of taxes owed instead of the usual 90%. The other rules regarding withholding apparently still apply.

Press release here:
https://www.irs.gov/newsroom/irs-wai...-short-in-2018

Quote:

The Internal Revenue Service announced today 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. ... For waiver purposes only, today’s relief lowers the 90 percent threshold to 85 percent. This means that a taxpayer will not owe a penalty if they paid at least 85 percent of their total 2018 tax liability.

[audreyh1]

And the estimated taxes paid threshold!

I’m pretty sure I exceeded 90% of what we owed with my Jan 15 payment, but this is a nice backstop.

If I’d known ahead would I have paid a bit less? Yes!

[donheff]

Does this mean they cut the standard deductions too much? Or is it just addressing general confusion over a major overhaul?

[Golden sunsets]

I wonder if it's possible that the treasury department calculated withholdings under the new tax code too low, thus pumping up take home during the year.


Sent from my iPad using Early Retirement Forum

[audreyh1]

Quote:

Originally Posted by donheff Does this mean they cut the standard deductions too much? Or is it just addressing general confusion over a major overhaul?

No. Just errors and underestimations due to a major tax change.

[kaneohe]

Hope they included that change on the F2210AI already. Otherwise w/ the shutdown, it probably won't be in time..........or at least very late.

[Philliefan33]

Quote:

Originally Posted by Golden sunsets I wonder if it's possible that the treasury department calculated withholdings under the new tax code too low, thus pumping up take home during the year. Sent from my iPad using Early Retirement Forum

I think this is the reason. Remember soon after the TCJA went into effect, there were lots of news stories about regular working stiffs seeing a bump in their take home pay. Now it’s time to file, and people are realizing that (for some) the tax cut wasn’t quite as beneficial as hoped.

[kgtest]

Phew!

[kgtest]

Quote:

Originally Posted by Philliefan33 I think this is the reason. Remember soon after the TCJA went into effect, there were lots of news stories about regular working stiffs seeing a bump in their take home pay. Now it’s time to file, and people are realizing that (for some) the tax cut wasn’t quite as beneficial as hoped.

My tax bill literally doubled this year. I certainly was expecting an increase, but not double, considering my family of four (kids 3 and 1 in daycare) had zero changes to our tax liabilities beyond the tax code change... forcing us from an itemized spending business to a contracting standard deduction family.

Really took a swipe at the middle class LMAO!

[kgtest]

I don't know the WHY behind eliminating underpayment, but my guess is half of america is going to realize they underpaid in 2018...and they didn't want the backlash and publicity of that realization that hey, the middle class voters lost in this deal.

[COcheesehead]

I scrambled to get enough in, now they tell us. I guess I will be just ahead of the game for April.

[RobLJ]

Quote:

Originally Posted by audreyh1 No. Just errors and underestimations due to a major tax change.

I'm cynical, but it seemed to me at the time that underwithholding was part of the Tax Scam Act, to give peeps lower down the ladder the impression that they would benefit (more than they were going to benefit).



I've been waiting for the outrage in high tax states when the inability to declare state/local on their 2018 tax bill hits the fan--although I think the outrage already hit the Cali House GOP square in the jaw in the last election.



It benefited me, to be sure; I had no choice but to withhold 20% on my yearly withdrawal, almost half of which will come back when I file. If/when the IRS issues tax refunds, that is.

[jebmke]

Quote:

Originally Posted by Golden sunsets I wonder if it's possible that the treasury department calculated withholdings under the new tax code too low, thus pumping up take home during the year. Sent from my iPad using Early Retirement Forum

That is one theory.


Our TaxAide state folks and IRS SPEC are suggesting we train our volunteers to have "difficult" conversations with taxpayers about negative spring surprises on their returns. Part of it is state related but we are getting the same message from the IRS SPEC.