Saturday 19 October 2019

US taxpayers given break by Treasury as fines reduced again

 

Treasury Secretary Steven Mnuchin
Treasury Secretary Steven Mnuchin

Laura Davison

The US Treasury Department is again reducing penalties for taxpayers who didn't pay enough of their tax bill throughout the year.

Taxpayers who paid at least 80pc of their estimated tax liability for 2018 through pay cheque withholding or quarterly estimated payments won't face Internal Revenue Service penalties this year, a senior Treasury official told reporters. Taxpayers typically pay fines if they don't cover at least 90pc of their tax liability during the year.

Its the second time Treasury has reduced the penalty threshold for the first filing season following the passage of the 2017 Republican tax overhaul.

In January, Treasury announced it would remove penalties for taxpayers who'd paid at least 85pc of their payments during 2018. Changes to tax brackets, withholding tables and the child tax credit associated with the new law left some taxpayers asking for too little to be withheld, leaving them with surprise tax bills when they file their returns.

The change follows requests from National Taxpayer Advocate Nina Olson of the IRS and two Democrats, Representative Judy Chu of California and Senator Kirsten Gillibrand of New York, who pushed for legislation after hearing that confused taxpayers were getting hit with steep penalties for under-withholding.

Many taxpayers this year are "shocked to discover they owe hundreds or thousands of dollars to the IRS through no fault of their own, and could even face penalties," Chu said in a statement.

"As tax filing season is in full swing, Treasury's action will relieve the financial anxiety facing worried taxpayers across the country."

Treasury Secretary Steven Mnuchin said that he was aware of bipartisan interest on the issue, and agreed that "further relief should be provided".

Taxpayers can also avoid underpayment penalties if they owe less than $1,000 or they paid 100pc of the amount they owed in the prior year.

The Treasury official, who spoke on condition of anonymity, said he expects the change will eliminate fines for 25pc to 30pc of taxpayers who would have owed if the threshold had been left at 90pc.

(Bloomberg)

Bloomberg

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