IRS announced that in August 2019 they would be refunding any Form 2210 underpayment penalty that was assessed if the taxpayers’ estimated tax payments and withholding covered at least 80% of their 2018 tax liability. Generally, the penalty applies if a taxpayer paid in less than 90% of the current year tax.
Early in 2019, IRS reduced the percentage penalty threshold from 90% to 85% and in March, further reduced it from 85% to 80%, for 2018 only. This means a taxpayer will not owe a penalty if they paid at least 80% of their total 2018 tax liability. Tax software companies made the changes, but many taxpayers may have filed before the final guidance was issued.
The IRS has done a sort on all returns filed and is able to identify who is eligible for the refund.
It is important to do a paycheck review of your withholdings for 2019, particularly if you made adjustments in 2018 or had a major life change. This will help to avoid an unexpected tax bill and/or penalties when you file. To assist you, the IRS has provided an updated Withholding Calculator. We are always available to assist you. Please contact us with any questions at 401-831-0200.