March 3, 2019 9:06 pm

IRS Waives Some Estimated Tax Penalties for 2018

Because of the number of changes in the rules for 2018 triggered by the Tax Cuts and Jobs Act, the IRS is waiving estimated tax penalties for certain individuals (IR-2019-03, 1/16/19). Usually, there’s no penalty if you pay at least 90% of what’s owed for the year through withholding and estimated taxes. For 2018, the IRS is lowering this threshold to 85%.

It is expected that tax preparation software will be adjusted to reflect this new percentage. Similarly, Form 2210 and the instructions will be revised accordingly.

Note: Even if you fall short of this 85% tax payment requirement, you may still escape estimated tax penalties in other ways:

  • Owing less than $1,000
  • Paying 100% of the prior year’s tax bill (110% if your adjusted gross income in the prior year exceeded $150,000, or $75,000 if married filing separately).
  • Claiming relief as a new retiree. This applies if you retired after reaching age 62 or became disabled during the tax year or in the preceding tax year for which you should have made estimated payments, and the underpayment was due to reasonable cause and not willful neglect.
  • Claiming relief because of a casualty event, disaster, or other unusual circumstance and it would be inequitable to impose a penalty on you.
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Tax Glossary

Return of capital

A distribution of your investment that is not subject to tax unless the distribution exceeds your investment.

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