IRS Penalty Waiver Expanded

The IRS announced they are expanding 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 also lowering to 80 percent the threshold required to qualify for this relief. Under the relief originally announced Jan. 16th, 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. 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.” – IRS Commissioner Chuck Rettig

What This Means

This is important news for taxpayers who owe(d) and have underpayments, as well as for tax preparers. It 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.

What if your client already filed?

If your client has already filed without asking for the penalty waiver because they did not qualify at the time, but qualifies now, you can request that waiver by filing Form 843. If they actually deposited at least 80% of the tax due and paid the penalty fee, they will receive a refund of the penalty paid. You will need to include the statement “80% Waiver of estimated tax penalty” on Line 7 of Form 843.

Paycheck Checkups are Important

This is why “Paycheck Checkups” to review withholding for 2019 is so important to ensure the right tax is still being withheld. Those most at risk of having too little tax withheld from their pay include taxpayers who itemized in the past but now take the increased standard deduction, as well as two-wage-earner households, employees with nonwage sources of income and those with complex tax situations.

To help taxpayers get their withholding right in 2019, the updated Withholding Calculator is now available on

One thing our sister company, Peoples Tax is doing for clients, is handing out guides from the IRS on how and why to perform a Paycheck Checkup. These are given out with the client’s copy of their tax return. This way they know how to avoid paying more tax then they need to in the future.