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IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Wed Jan 16, 2019 6:22 pm
by NotWhoYouThink
https://www.reuters.com/article/us-usa- ... SKCN1PA2VD

For those not sure whether they had enough withheld last year, you may get a break.

Re: IRS to lower 2018 safe harbor withholding threshold to 85%

Posted: Wed Jan 16, 2019 6:41 pm
by FactualFran
Additional details are in the IRS News Release.

Re: IRS to lower 2018 safe harbor withholding threshold to 85%

Posted: Wed Jan 16, 2019 6:44 pm
by Artsdoctor
You might want to change the title to "IRS to lower safe harbor withholding threshold to 85% for 2018 only" since it's a one-time deal. They realize that the withholding tables were hopelessly optimistic and just plain wrong for a lot of people, and this is an attempt to reduce the ire. The IRS rarely does anything out of the goodness of its heart.

IRS lowers threshold for avoiding withholding penalty

Posted: Thu Jan 17, 2019 10:58 am
by mptfan
[Thread merged into here, see below. --admin LadyGeek]

IRS waives penalty for many whose tax withholding and estimated tax payments fell short in 2018
IR-2019-03, January 16, 2019

WASHINGTON — The Internal Revenue Service announced today that it is waiving the estimated tax penalty for many taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.

The IRS is generally waiving the penalty for any taxpayer who paid at least 85 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. The usual percentage threshold is 90 percent to avoid a penalty.

https://www.irs.gov/newsroom/irs-waives ... rt-in-2018

Re: IRS lowers threshold for avoiding withholding penalty

Posted: Thu Jan 17, 2019 1:22 pm
by Clever_Username
Why couldn't they have told me that a year ago? I would have withheld more! ;-)

Seriously, thank you for alerting me to this. I haven't read the article but I am guessing it is not guaranteed to apply for CY2019 taxes.

IRS waiving under-withholding penalty for more people in 2018

Posted: Thu Jan 17, 2019 1:41 pm
by investor4life
[merged this post and its replies into the existing thread - moderator prudent]

Good news from the IRS :sharebeer . They are waiving the penalty if tax withholding and estimated tax payments were at least 85% of 2018 taxes (down from 90%).

Re: IRS waiving under-withholding penalty for more people in 2018

Posted: Thu Jan 17, 2019 1:50 pm
by corn18
Yeah! That helps me. I had a lot of weird moving income at the end of the year and missed the 90% safe harbor by a thousand buck or so. Penalty was only like $2.80, so not a big deal.

Re: IRS waiving under-withholding penalty for more people in 2018

Posted: Thu Jan 17, 2019 1:51 pm
by DrGoogle2017
Darn it, this is the year that I overpaid my tax by a large amount.

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Thu Jan 17, 2019 9:11 pm
by LadyGeek
I merged mptfan's thread into the on-going discussion. I also retitled the thread for clarity.

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Thu Jan 17, 2019 9:30 pm
by NotWhoYouThink
Because you have to say 2018 twice?

Re: IRS waiving under-withholding penalty for more people in 2018

Posted: Thu Jan 17, 2019 10:40 pm
by whodidntante
DrGoogle2017 wrote:
Thu Jan 17, 2019 1:51 pm
Darn it, this is the year that I overpaid my tax by a large amount.
Thanks, citizen!

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Thu Jan 17, 2019 10:57 pm
by Dale_G
Oh woe! No help for the poor folks who have to withhold 110%.

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Thu Jan 17, 2019 11:11 pm
by JGoneRiding
Sure they announce this AFTER I had an extra $500 with held from Dec paycheck to make sure I met the safe harbor of having paid 100% plus of the previous years tax!

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Fri Jan 18, 2019 12:10 am
by AlphaLess
Dale_G wrote:
Thu Jan 17, 2019 10:57 pm
Oh woe! No help for the poor folks who have to withhold 110%.
What are the conditions under which you are required to withhold 110%?

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Fri Jan 18, 2019 7:52 am
by terran
AlphaLess wrote:
Fri Jan 18, 2019 12:10 am
Dale_G wrote:
Thu Jan 17, 2019 10:57 pm
Oh woe! No help for the poor folks who have to withhold 110%.
What are the conditions under which you are required to withhold 110%?
This isn't related to the 110% threshold, it's related to the 90% of current year's tax liability threshold, which will now be the 85% for the 2018 tax year.

The 110% threshold applies to the previous year's tax liability for people with an AGI over $150k ($75k if married filing separately). For everyone under that, if you withheld 100% of the previous years tax liability (2017 in this case), then you also don't owe a penalty (regardless of what percentage of your 2018 tax liability you paid).

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Fri Jan 18, 2019 8:02 am
by Bacchus01
JGoneRiding wrote:
Thu Jan 17, 2019 11:11 pm
Sure they announce this AFTER I had an extra $500 with held from Dec paycheck to make sure I met the safe harbor of having paid 100% plus of the previous years tax!
No kidding, except I had $1000 extra from each of my last two checks.

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Fri Jan 18, 2019 2:58 pm
by FactualFran
AlphaLess wrote:
Fri Jan 18, 2019 12:10 am
What are the conditions under which you are required to withhold 110%?
Here is a quote from the 2017 instructions Form 2210 (Underpayment of Estimated Tax by Individuals, Estates, and Trusts).
If your adjusted gross income (AGI) for 2016 was more than $150,000 ($75,000 if your 2016 filing status is married filing separately), substitute 110% for 100% in (2) above.
In the instructions for other years, "2016" would be replaced with the previous year. The condition is on the withholding and timely estimated tax payments, not the withholding alone.

Re: IRS to lower 2018 safe harbor withholding threshold to 85%

Posted: Fri Jan 18, 2019 6:23 pm
by Olemiss540
Artsdoctor wrote:
Wed Jan 16, 2019 6:44 pm
You might want to change the title to "IRS to lower safe harbor withholding threshold to 85% for 2018 only" since it's a one-time deal. They realize that the withholding tables were hopelessly optimistic and just plain wrong for a lot of people, and this is an attempt to reduce the ire. The IRS rarely does anything out of the goodness of its heart.
IRS to lower 2018 safe harbor withholding threshold to 85%

Isnt the fact this is for 2018 taxes implied by inserting "2018" in the title instead of saying: "IRS to lower safe harbor withholding threshold to 85%"?

Re: IRS to lower 2018 safe harbor withholding threshold to 85%

Posted: Fri Jan 18, 2019 6:37 pm
by NotWhoYouThink
Olemiss540 wrote:
Fri Jan 18, 2019 6:23 pm
Artsdoctor wrote:
Wed Jan 16, 2019 6:44 pm
You might want to change the title to "IRS to lower safe harbor withholding threshold to 85% for 2018 only" since it's a one-time deal. They realize that the withholding tables were hopelessly optimistic and just plain wrong for a lot of people, and this is an attempt to reduce the ire. The IRS rarely does anything out of the goodness of its heart.
IRS to lower 2018 safe harbor withholding threshold to 85%

Isnt the fact this is for 2018 taxes implied by inserting "2018" in the title instead of saying: "IRS to lower safe harbor withholding threshold to 85%"?
That was the intent. If I had edited for clarity it would have been:
IRS to lower 2018 [only] safe harbor withholding threshold to 85%.
But keeping track of the number of "h"s in withholding and threshold was as much as I could handle.

Re: IRS to lower 2018 safe harbor withholding threshold to 85%

Posted: Fri Jan 18, 2019 7:20 pm
by Olemiss540
NotWhoYouThink wrote:
Fri Jan 18, 2019 6:37 pm
Olemiss540 wrote:
Fri Jan 18, 2019 6:23 pm
Artsdoctor wrote:
Wed Jan 16, 2019 6:44 pm
You might want to change the title to "IRS to lower safe harbor withholding threshold to 85% for 2018 only" since it's a one-time deal. They realize that the withholding tables were hopelessly optimistic and just plain wrong for a lot of people, and this is an attempt to reduce the ire. The IRS rarely does anything out of the goodness of its heart.
IRS to lower 2018 safe harbor withholding threshold to 85%

Isnt the fact this is for 2018 taxes implied by inserting "2018" in the title instead of saying: "IRS to lower safe harbor withholding threshold to 85%"?
That was the intent. If I had edited for clarity it would have been:
IRS to lower 2018 [only] safe harbor withholding threshold to 85%.
But keeping track of the number of "h"s in withholding and threshold was as much as I could handle.
Just dont let it happen again. :sharebeer

And thanks for posting this info. Was new to me,

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Fri Jan 18, 2019 10:56 pm
by gasdoc
Dale_G wrote:
Thu Jan 17, 2019 10:57 pm
Oh woe! No help for the poor folks who have to withhold 110%.
Thats what I was thinking!

gasdoc

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Fri Jan 18, 2019 11:01 pm
by terran
gasdoc wrote:
Fri Jan 18, 2019 10:56 pm
Dale_G wrote:
Thu Jan 17, 2019 10:57 pm
Oh woe! No help for the poor folks who have to withhold 110%.
Thats what I was. thinking!

gasdoc
Not the same threshold. This is a change to the normal 90% of the current year tax liability threshold. The 100%/110% depending on income threshold applies to the previous year tax tax liability and is unchanged for any income level.

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Sat Jan 19, 2019 8:36 am
by gasdoc
terran wrote:
Fri Jan 18, 2019 11:01 pm
gasdoc wrote:
Fri Jan 18, 2019 10:56 pm
Dale_G wrote:
Thu Jan 17, 2019 10:57 pm
Oh woe! No help for the poor folks who have to withhold 110%.
Thats what I was. thinking!

gasdoc
Not the same threshold. This is a change to the normal 90% of the current year tax liability threshold. The 100%/110% depending on income threshold applies to the previous year tax tax liability and is unchanged for any income level.
I understood that, but i see how it could be confused. Thanks! I am wishing I could just pay 85% of last years tax burden....

gasdoc

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Mon Feb 11, 2019 8:02 pm
by TexTaxToo
Beware. According to the Form 2210 instructions, this 85% tax reform waiver is not automatic (like the 90% threshold is).
You must check Box A in Part II, write "85% Waiver" next to Box A, and file page 1 of Form 2210 with your return to request the waiver.

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Mon Feb 11, 2019 8:38 pm
by kaneohe
The 85% rule applies for estimated taxes regardless of their timing if they were paid by the Q4 deadline? Normally they require equal installments.

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Wed Feb 13, 2019 4:00 pm
by TexTaxToo
Apparently so. The normal 90% threshold applies only to withholding - not estimated payments.

But according to the worksheet, the 85% waiver applies to withholding plus "your 2018 estimated tax payments made on
or before January 15, 2019".

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Wed Feb 13, 2019 4:43 pm
by FactualFran
TexTaxToo wrote:
Wed Feb 13, 2019 4:00 pm
Apparently so. The normal 90% threshold applies only to withholding - not estimated payments.
It is not 90% of withholding only. According to the Who Must Pay the Underpayment Penalty of the Instructions for Form 2210:
In general, you may owe the penalty for 2018 if the total of your withholding and timely estimated tax payments didn't equal at least the smaller of:
  • 90% of your 2018 tax, or
  • 100% of your 2017 tax. Your 2017 tax return must cover a 12-month period.

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Wed Feb 13, 2019 5:00 pm
by boomer_techie
TexTaxToo wrote:
Wed Feb 13, 2019 4:00 pm
But according to the worksheet, the 85% waiver applies to withholding plus "your 2018 estimated tax payments made on
or before January 15, 2019".
Yeah, it looks like anyone who did a "catch up" estimated payment to the 85% level by January 15th can now be exempted from an underpayment penalty. There appears to be no need for equal payments, nor meeting the 85% level each tax quarter. That's quite a big loophole - you could drive a Brinks truck through it. But note, they announced the 85% rule after the 15th so nobody was able to plan ahead for it.

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Fri Mar 22, 2019 1:49 pm
by TexTaxToo
And today, the IRS lowered the threshold further to 80%, again for 2018 only. New instructions for Form 2210 will be forthcoming.

(Those who have already filed may file Form 843 with the statement "80% Waiver of estimated tax penalty" on line 7.)

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Mon Mar 25, 2019 10:41 am
by slamfire
boomer_techie wrote:
Wed Feb 13, 2019 5:00 pm
... There appears to be no need for equal payments, nor meeting the 85% level each tax quarter...
This appears to also be my understanding per the IRS's Instructions for Form 2210, but could anyone else confirm?

I'm in this same situation and was hoping someone else could confirm before I submit my tax return.

Re: IRS to lower 2018 safe harbor withholding threshold to 85% [2018 only]

Posted: Mon Mar 25, 2019 1:20 pm
by gokartmozart
TexTaxToo wrote:
Fri Mar 22, 2019 1:49 pm
And today, the IRS lowered the threshold further to 80%, again for 2018 only. New instructions for Form 2210 will be forthcoming.

(Those who have already filed may file Form 843 with the statement "80% Waiver of estimated tax penalty" on line 7.)
I agree with TexTaxToo. The waiver is now 80% down from 85%. Here's the official IRS statement on the 80% waiver: Notice 2019-25.
boomer_techie wrote:
Wed Feb 13, 2019 5:00 pm
There appears to be no need for equal payments, nor meeting the 85% level each tax quarter.
My reading of the IRS's official statement is you simply take a ratio of whole-year totals. Your year's total payments is the numerator. The year's total tax is the denominator. (See the "85% Waiver Worksheet in the Form 2210 instructions for important details such as how to handle credits.) If your ratio is greater than 0.80 then you qualify for the waiver. There is no requirement for equal estimated payments. If you made unequal payments you do not have to work through the Annualized Income process in Form 2210.

If you qualify for the 80% waiver:

1. If you have not yet filed your return. The instructions for Form 2210 tell you how and where to write "85% Waiver" near the beginning of the form. Once you have done that you do not need to complete the rest of the 2210. Simply write "80% Waiver" where the 2210 instructions tell you to write "85% Waiver". At some point the IRS will perhaps update the 2210 instructions to read "80%" in place of "85%". Until then Notice 2019-25 gives you official permission to use "80%".

2. If you have already filed your return. You paid a penalty and you can get it back by sending in Form 843. Notice 2019-25 explains how.

edited to add pointer to 85% Waiver Worksheet for details.