The U.S. Department of the Treasury announced this week that it has lowered the withholding underpayment threshold to 80 percent.
This change – designed to provide more relief to taxpayers — applies to taxpayers whose total withholding and estimated tax payments for 2018 are equal to or greater than 80 percent of their taxes owed. The threshold to avoid a penalty had been 90 percent, but then was reduced to 85 percent earlier this year before reducing it further t0 80 percent.
“I appreciate the bipartisan interest from members of Congress on this issue and agree that further relief should be provided to taxpayers,” Treasury Secretary Steven Mnuchin said. “Treasury is exempting even more taxpayers from the usual underpayment penalties in an effort to help those who attempted in good faith to meet their withholding obligations.”
In cases where taxpayers have miscalculated their 2019 withholdings, this waiver ensures they will not face the standard penalty for underpaying their taxes. More guidance and updated instructions will provide taxpayers with additional information on this relief and filing for penalty abatement.
Treasury encourages taxpayers to check their withholding at IRS.gov/withholding to make sure they are properly withheld for 2019 and are receiving the full benefits of the new tax law.