The United States government requires taxpayers to make tax payments throughout the year. Taxpayers often meet this obligation by withholding tax payments from their paychecks or making estimated tax payments throughout the year. However, if a taxpayer fails to pay a certain percentage of his or her tax obligation throughout the year, the Internal Revenue Service (IRS) will issue a penalty.
However, according to a recent statement from the IRS, the federal agency may forego penalties for 2018 tax filings.
Why would the IRS forego penalties? The announcement explains the IRS will waive estimated tax penalties for some taxpayers due to confusion surrounding the Tax Cuts and Jobs Act.
Part of the issue reaches back to guidance provided by the IRS earlier in 2018. At that time, the guidance provided was incomplete. As such, taxpayers who made adjustments to their taxes based on this guidance could have chosen to withhold too little from their paychecks.
The IRS encourages taxpayers to use this waiver as a reminder to review and update withholdings and estimated tax payments for the 2019 tax season as appropriate.
Could confusion result in an audit? This is just one example of the confusion taxpayers are experiencing as they attempt to file tax returns under this new tax structure. Such confusion could cause a taxpayer to make a mistake in his or her tax returns, potentially triggering an audit. Those who are the subject of an audit are wise to seek legal counsel to better ensure their rights are protected during the process.