When the Tax Cuts and Jobs Act (TCJA) went into effect in 2018, it caused many tax-related changes for businesses, including changes regarding tax withholdings. The result was many companies that failed to withhold enough to cover their end-of-the-year tax obligations. Generally, if a company fails to cover 90 percent or more of their estimated tax, it can face serious penalties from the Internal Revenue Service (IRS).
While the IRS emphasizes the importance of accurately estimating taxes, it understands that obligations can vary from year to year, and the agency provides a 10 percent leeway without penalties. A larger discrepancy can result in tax compliance issues and fines. The TCJA, however, caused problems for many taxpayers when it came to matching their withholdings to their newly calculated tax obligations.
Because of the effects and uncertainty caused by the TCJA, the IRS announced in August that it would automatically waive fees for eligible taxpayers who were within 80 percent of their taxes. By lowering the threshold from 90 percent to 80 percent, about 400,000 taxpayers will now be eligible for the fee waiver who were not before. Qualified taxpayers will receive the waiver without having to take any further action on their own.
Plan for 2019
The end of 2019 is coming quickly, and it is important to avoid mistakes regarding your estimated tax. The IRS will likely raise the threshold back to 90 percent in the future, so every business should consult with an experienced tax lawyer in San Francisco to make sure they are on target to avoid penalties.
Contact Our Tax Lawyers in San Francisco for More Information
If you have any tax-related legal questions, feel free to speak with a San Francisco tax attorney at Diosdi Ching & Liu, LLP. Call 415.318.3990 or contact us online today.