IRS grants waivers of tax underpayment penalties for more than 400,000 taxpayers. . .
In the middle of August, the IRS announced it would automatically waive the tax underpayment penalty for more than 400,000 taxpayers who have already submitted their 2018 federal income tax return and failed to claim a special penalty waiver this spring.
The waiver is only of the penalty. Any taxes that are owed must be paid.
Normally, taxpayers must pay at least 90% of the income taxes owed for a given year, or 100% of the tax liability from the prior year before filing a return, to avoid an underpayment penalty. The threshold is 110% if adjusted gross income on that year’s return exceeds $150,000.
Earlier in 2019, the IRS lowered the usual 90% penalty threshold to 80% to help taxpayers whose withholding and estimated tax payments were below their total 2018 tax liability. The IRS also removed the requirement that taxpayers make estimated tax payments in four equal installments, provided all were made by January 15, 2019. The 90% threshold was initially lowered to 85% on January 16 and further lowered to 80% on March 22.
The automatic waiver applies to any individual taxpayer who paid at least 80% of his or her total tax liability through federal income tax withholding or quarterly estimated tax payments but did not claim the special waiver when filing their 2018 return earlier in 2019.
Over the remaining months of 2019, the IRS will mail copies of notices CP 21 granting this relief to affected taxpayers. Any eligible taxpayer who already paid the penalty will also receive a refund check about three weeks after their CP21 notice whether or not they requested penalty relief. The IRS has emphasized that eligible taxpayers who have already filed a 2018 return do not need to request penalty relief, contact the IRS or take any other action to receive this relief.
Ways to resolve tax issues for passport purposes. . .
UPDATE: Last we reported on the IRS urging any taxpayer with a tax debt certified as seriously delinquent to resolve this debt to avoid the loss of his or her passport. There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt. They include the following:
- Paying the tax debt in full;
- Paying the tax debt timely under an approved installment agreement;
- Paying the tax debt timely under an accepted offer in compromise;
- Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice;
- Having a pending collection due process appeal with a levy; or
- Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.
Relief programs for unpaid taxes. . .
Frequently, taxpayers qualify for one of several relief programs including the following:
- Payment agreement. Taxpayers can ask for a payment plan with the IRS. A tax professional may assist with this process and help avoid delays.
- Offer in compromise. Some taxpayers may qualify for an offer in compromise, an agreement between the IRS and a taxpayer permanently resolving liability for less than the full balance of the tax debt. The IRS reviews a taxpayer’s income and assets to determine the ability to pay. A tax professional may assist with this process and help avoid delays.
If you live in the New York or the Tri-State area and have any questions about any tax-related issues, especially those related to SALT deductions, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
