Underpayment of Estimated Tax

The IRS has expressed concern that the updated withholding calculator it released in February 2018 in association with the Tax Cuts and Jobs Act, has not made the problem of calculating tax withholding any easier. The IRS is issuing relief from penalties for underpayment of estimated income tax to individual taxpayers who have paid 85% of their 2018 tax liability with withholding and estimated tax payments.This change represents a decrease from the old requirement, which required an income tax payment of the lessor of: (a) 90% of the tax shown on the current tax year return or (b) 100% of the tax shown on the preceding tax year return (110% if the individual’s AGI exceeded $150,000).Accordingly, the IRS is waiving the penalties and interest for individual taxpayers who meet the criteria in the first paragraph. To request the waiver, an individual taxpayer must file Form 2210 with his or her 2018 income tax return. Then, the individual must check the waiver box in Part II, box A, of the form and include the statement “85% waiver” on the return.Please reach out to us with questions you may have about your estimated tax payments.Click here to read the full article from Journal of Accountancy.