IRS Responds to TCJA Changes
The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, changed the way tax is calculated for most taxpayers, including those with income not subject to withholding. With nearly 10 million U.S. taxpayers facing a penalty for underpayment of estimated tax last year, the IRS is campaigning for employers and individuals to plan ahead, understand their options and avoid a penalty when they file their tax returns in 2019 for the 2018 tax year.
To help taxpayers avoid this common situation, the IRS is highlighting a variety of resources and tools – including the online Withholding Calculator – to help taxpayers determine if they need to make an additional tax payment to avoid an unwelcome surprise at tax time.
In addition, the IRS is encouraging all taxpayers, including self-employed individuals to make sure they are sending in sufficient quarterly tax payments. Those who have other income, such as interest, dividends, self-employment, capital gains, prizes and awards or have too little tax withheld from wages may need to make estimated or additional tax payments.
What can employees, employers and self-employed individuals do to keep from getting an unpleasant surprise in 2019? Perform a Paycheck Checkup!
One of the top IRS initiatives to help taxpayers avoid tax withholding penalties in 2018, is the Paycheck Checkup Campaign. The campaign is a sweeping effort to advise taxpayers about the importance of doing a “paycheck checkup” to make sure that the right amount of taxes are being withheld from their paychecks. The IRS is collaborating with tax professionals, partner organizations, employers, community groups and the tax and payroll industries to educate employers and employees about the importance of checking their withholding.
The IRS offers a convenient way to perform a Paycheck Checkup by using the Withholding Calculator on the IRS website.
Employees who expect to receive long term capital gains or qualified dividends, or employees who owe self-employment tax, alternative minimum tax, or tax on unearned income of minors should use the instructions and worksheets in Publication 505 to check whether they should change their withholding or pay estimated tax.
Form 1040-ES, Estimated Tax for Individuals, available on IRS.gov, is designed to help taxpayers figure these payments simply and accurately. The estimated tax package includes a quick rundown of key tax changes, income tax rate schedules for 2018 and a useful worksheet for figuring the right amount to pay.
More information about tax withholding and estimated tax can be found on the agency’s Pay As You Go web page.