Surprise 2018 IRC 6654 Underpayment of Estimated Tax Penalty!
Despite the partial federal government shut down, the IRS will begin accepting 2018 tax returns on January 29, 2019. The Tax Cuts and Jobs Act (TCJA) lowered the amount of tax withheld from our paychecks in 2018. However, tax withholding tables were not available to employers until mid-January, and some employers did not switch until mid-February. This means that initially your employer may not have withheld enough tax from your paychecks! If 90 % of your tax was not withheld by the end of the year, you are in trouble! The IRS will charge you, not your employer, with an underpayment of estimated tax penalty!
Even the IRS sees that this is unfair! If tax withholdings equal 85 % of the tax on your return, underpayment penalties (IRC 6654) are waived. This is for the 2018 tax year ONLY!
However, the IRS will NOT CUT You ANY SLACK UNLESS you ASK the IRS for this break! The Secretary of the Treasury can abate a penalty under Internal Revenue Code Section 6654(e). IRC 6654(e) says a penalty can be waived if “by reason of casualty, disaster, or other unusual circumstances the imposition of such addition to tax would be against equity and good conscience.” The TCJA is the “other unusual circumstances”. You must file Form 2210 with your 2018 tax return to get the penalty abatement. Federal Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts.
Do you need to file Form 2210 with your 2018 tax return? Call Coast One Tax Group, or drop us a text or an email, to see if our Tax Preparation Department can help!