Did you pay in 80% or more of your 2018 tax liability, have already filed your return, and were subject to an underpayment penalty because you fell short of the usual 90% required level? In an effort to help taxpayers who weren’t able to properly adjust their 2018 quarterly estimated tax payments and/or federal income tax withholdings to meet the tax law changes brought about by the Tax Cuts and Jobs Act enacted in 2017 (and would be subject to the underpayment penalty,) the Internal Revenue Service has lowered the threshold to 80% or more of their total tax liability. Normally the percentage threshold to avoid a penalty is 90%. This waiver will apply only to the 2018 tax year and certain conditions may apply.
Here’s some good news if you have already filed:
Taxpayers who are eligible for the waiver of the underpayment penalty due to the amount of withholding and estimated payments being greater than 90% of tax due, and who have already filed their 2018 tax returns, can still qualify for the expanded relief. If you qualify, you will need to file a refund claim Form 843 “Claim for Refund and Request for Abatement” and included the statement “80% Waiver of estimated tax penalty” on line 7 of the form.
The IRS is NOT going to automatically send refunds out. Therefore, anyone who had a penalty on their tax returns and filed PRIOR to 3/23/2019 (and even those within a few days of that date until computer programs were brought up to speed), should file this form to obtain the penalty relief.
In January the IRS had lowered this level to 85%, and subsequently dropped it to 80%.
If you have any questions on this, do not hesitate to contact Apel Associates.