The Basics of Estimated Taxes for Individuals

NSTP2019 Tax Season

The Basics of Estimated Taxes for Individuals

The U.S. tax system operates on a pay-as-you-go basis. This means that taxpayers need to pay most of their tax during the year, as the income is earned or received. Taxpayers must generally pay at least 90 percent (however, see 2018 Penalty Relief, below) of their taxes throughout the year through withholding, estimated or additional tax payments or a combination of the two. If they don’t, they may owe an estimated tax penalty when they file. The IRS has seen an increasing number of taxpayers subject to estimated tax penalties, which apply when someone underpays their taxes. The number of people who paid this penalty jumped from 7.2 million in 2010 to 10 million in 2017, an increase of nearly 40 percent. The penalty amount varies but can be several hundred dollars. The Tax Cuts and Jobs Act, enacted in December 2017, changed the way tax is calculated for most taxpayers, including those with substantial income not subject to withholding. As a result, many taxpayers may need to adjust the amount of tax they pay each quarter through the estimated tax system. Here are some simple tips to help taxpayers: Who May Need to Pay Estimated Taxes: Individuals, including sole … Read More

IRS Dispels Five Myths About Tax Refunds

NSTP2019 Tax Season

IRS Dispels Five Myths About Tax Refunds

As the April tax-filing deadline approaches, the Internal Revenue Service understands that taxpayers are anxious to get details about their tax refunds. This has led to a number of common myths about refunds that often circulate on social media. While there’s no secret way for taxpayers to find out when their refund will be issued, there are some key facts that can help people understand the refund process. Taxpayers should keep in mind the IRS issues nine out of 10 tax refunds in less than 21 days. And the easiest way to check on a refund is “ Where’s My Refund?”, an online tool available on IRS.gov and through the IRS2Go app. People can use “Where’s My Refund?” to check on the status of their tax return within 24 hours after the IRS receives an e-filed return or four weeks after a mailed paper return. The “Where’s My Refund?” tool is updated no more than once every 24 hours, usually overnight, so there’s no need to check the status more often. Taxpayers should only call the IRS tax help hotline to talk to a representative if it has been: 21 days or more since their tax return was e-filed, Six … Read More

IRS Expands Penalty Waiver for Those Whose Tax Withholding and Estimated Tax Payments Fell Short in 2018; Key Threshold Lowered to 80 Percent

NSTP2019 Tax Season, Internal Revenue Service (IRS)

IRS Expands Penalty Waiver for Tax Year 2018

The Internal Revenue Service has provided additional expanded penalty relief to taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year. The IRS is lowering to 80 percent the threshold required to qualify for this relief. Under the relief originally announced January 16, the threshold was 85 percent. The usual percentage threshold is 90 percent to avoid a penalty. “We heard the concerns from taxpayers and others in the tax community, and we made this adjustment in an effort to be responsive to a unique scenario this year,” said IRS Commissioner Chuck Rettig. “The expanded penalty waiver will help many taxpayers who didn’t have enough tax withheld. We continue to urge people to check their withholding again this year to make sure they are having the right amount of tax withheld for 2019.” This means that the IRS is now waiving the estimated tax penalty for any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. Today’s revised waiver computation will be integrated into commercially-available tax software and … Read More

In the Know: Proposal by House Democrats to Extend Tax-Filing Deadline

NSTP2019 Tax Season, Internal Revenue Service (IRS)

Proposal by House Democrats to Extend Tax-filing Deadline

Normally, we do not publish proposed legislation as many factors come into play between the time a bill is proposed and the final bill that is actually passed and signed by the President. However, I am making this one exception to give you an opportunity to express your thoughts to your state representative in the House. A pair of House Democrats has introduced a bill to extend the tax-filing deadline until May 20 to give taxpayers more time to file their taxes after the partial government shutdown, amid lingering uncertainty over the extensive changes in the tax code and tax forms in the wake of the Tax Cuts and Jobs Act. Reps. Sean Casten, D-Ill., and Lauren Underwood, D-Ill., introduced the Taxpayer Extension Act on Wednesday to give taxpayers an extra five weeks to file their individual tax returns for 2018. They noted that during the 35-day shutdown, the IRS sent close to 90 percent of its workforce home without pay. The Taxpayer Extension Act would provide an extension of the tax return due date for five weeks, from April 15, 2019 to May 20, 2019, for individual income tax returns for 2018, to provide additional time equal to the … Read More

IRS Finalizes Centralized Partnership Audit Regulations

NSTP2019 Tax Season, Internal Revenue Service (IRS), Partnerships, TEFRA

IRS Finalizes Centralized Partnership Audit Regulations

The IRS on February 15 issued final regulations (T.D. 9844) that implement the centralized partnership audit regime that now governs partnership audit procedures. Centralized Partnership Audit Regime: The new rules are aimed at increasing the rate of partnership audits by reducing the challenges facing the IRS under TEFRA. The scope of the new regime includes all items required to be shown on the partnership return, including adjustments to items of income, gain, deduction, loss or credit, and each partner’s distributive share thereof. Additionally, in a departure from the TEFRA regime, which traditionally passed through items of income and loss to investors, the new regime places the liability on the partnership, which will now be liable for the tax in the year an adjustment is made. The tax is assessed at the highest tax rate in effect at that time for the particular item. Additionally, there are mandatory consistent reporting requirements, partnership level proceedings, and a requirement to designate a representative for proceedings. It is anticipated that state and local revenue agencies will adopt similar rules as they issue updated guidance. The final regulations affect partnerships for tax years beginning after December 31, 2017, and ending after August 12, 2018, as … Read More

Message to Taxpayers from Commissioner Chuck Rettig

NSTP2019 Tax Season, Internal Revenue Service (IRS)

Please take a moment to view the message for taxpayers on YouTube from our Commissioner, Chuck Rettig. In the video, he shares important tips for this year’s filing season, including choosing a trusted tax professional, reminding people to check their withholding, etc. At a recent meeting of the National Public Liaison in Washington DC, Commissioner Rettig spoke for an hour with the tax professional community regarding the process employed by the IRS during the recent government shutdown which included daily calls with the top executives of the IRS regarding staffing issues, community outreach and effect on the individual taxpayers. He asked that we all give the IRS staff the time they need to get caught up with their workload. The mail room handled over 5 million pieces of backlogged mail and an additional 700,000 pieces are being received daily. While the mail room clears their backlog, it is creating a tremendous workload burden on the departments to respond to the mail. There were over 2,000 new hires in training when the government shutdown. Then the weather in the Midwest also affected the level of service since the office staff could not get into work. The commissioner identified three classes of … Read More