In the months since adjusted withholding tables were implemented by the IRS in the wake of the Tax Cuts and Jobs Act, it has become clear to individual taxpayers and tax preparers that the tables did not account for factors such as the elimination of personal and dependency exemptions or reduced itemized deductions.
The result: Many taxpayers were unable to accurately calculate their tax liability for 2018 and may have inadvertently under-withheld their taxes.
Fortunately, the IRS saw the challenges that taxpayers could have with the new withholding tables and provided underpayment penalty relief. The IRS will waive the underpayment penalty for individuals who paid, by Jan. 15, 2019, at least 85% of the tax due for the current year.
The South Carolina Association of CPAs and the AICPA welcome this change but believe more must be done. We are hearing from many members that they and their clients are very concerned about the ongoing uncertainty around implementation of the TCJA.
The AICPA sent a letter on Jan. 28 to the Department of Treasury and the IRS urging them to provide more extensive relief to taxpayers. The letter cites five recommendations that would benefit taxpayers:
- Taxpayers should receive relief from underpayment penalties if they paid at least 80% of the tax due for the current year or they paid 80% (100% if their adjusted gross income (AGI) exceeds $150,000) of amount of tax shown on their U.S. income tax return for the prior yea
- Taxpayers should also receive relief from late payment penalties if they make a timely request for an extension of time to file their income tax return and pay at least 80% of the taxes owed with the request
- The IRS should establish an expedited process to grant individuals’ payment penalty relief for reasonable cause due to considerable uncertainty surrounding the TCJA
- Taxpayers need the IRS to identify specific circumstances for which providing automatic relief of penalties for the 2018 taxable year is appropriate, thus relieving them of the administrative burden of requesting a waiver of penalties
- The IRS should also provide businesses and tax-exempt organizations relief from underpayment and late payment penalties
For updates on advocacy efforts in the profession, visit the AICPA’s Tax Reform Resource Center at www.aicpa.org/taxreform.