Now that we’re in the second half of tax season, we’re observing that the rumors were indeed correct. While many taxpayers may have benefited from the Tax Cuts and Jobs Act, they unfortunately don’t feel the benefits because many are receiving smaller refunds or are even owing additional tax with their returns this year. This is a result of the IRS making adjustments to the income tax withholding tables early in 2018 with the goal of passing the expected tax savings on to taxpayers throughout the year rather than at tax time.
The good news is that we now are early enough in the year to make any necessary adjustments for the rest of the year to get back on track.
If you had a large tax liability this year, it is important to either adjust your withholdings or make estimated payments to avoid any underpayment penalties going into 2019. The IRS uses various calculations to determine the potential under-payment penalty, therefore we recommend running the numbers to determine if you are within the reasonable ranges.
The IRS relaxed the rules related to underpayment penalties for the 2018 tax year but is unlikely to do so for 2019. Therefore, it is even more important to plan ahead to avoid a penalty for the 2019 tax year.