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

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
NotWhoYouThink
Posts: 2755
Joined: Fri Dec 26, 2014 4:19 pm

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

Post by NotWhoYouThink » Wed Jan 16, 2019 6:22 pm

https://www.reuters.com/article/us-usa- ... SKCN1PA2VD

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

FactualFran
Posts: 938
Joined: Sat Feb 21, 2015 2:29 pm

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

Post by FactualFran » Wed Jan 16, 2019 6:41 pm

Additional details are in the IRS News Release.

User avatar
Artsdoctor
Posts: 4129
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

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

Post by Artsdoctor » 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.

mptfan
Posts: 5643
Joined: Mon Mar 05, 2007 9:58 am

IRS lowers threshold for avoiding withholding penalty

Post by mptfan » Thu Jan 17, 2019 10:58 am

[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

User avatar
Clever_Username
Posts: 1384
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: IRS lowers threshold for avoiding withholding penalty

Post by Clever_Username » Thu Jan 17, 2019 1:22 pm

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.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

investor4life
Posts: 186
Joined: Fri Oct 08, 2010 9:45 am

IRS waiving under-withholding penalty for more people in 2018

Post by investor4life » Thu Jan 17, 2019 1:41 pm

[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%).

User avatar
corn18
Posts: 1532
Joined: Fri May 22, 2015 6:24 am

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

Post by corn18 » Thu Jan 17, 2019 1:50 pm

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.
Don't do something, just stand there!

DrGoogle2017
Posts: 2528
Joined: Mon Aug 14, 2017 12:31 pm

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

Post by DrGoogle2017 » Thu Jan 17, 2019 1:51 pm

Darn it, this is the year that I overpaid my tax by a large amount.

User avatar
LadyGeek
Site Admin
Posts: 57832
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

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

Post by LadyGeek » Thu Jan 17, 2019 9:11 pm

I merged mptfan's thread into the on-going discussion. I also retitled the thread for clarity.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Topic Author
NotWhoYouThink
Posts: 2755
Joined: Fri Dec 26, 2014 4:19 pm

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

Post by NotWhoYouThink » Thu Jan 17, 2019 9:30 pm

Because you have to say 2018 twice?

User avatar
whodidntante
Posts: 6705
Joined: Thu Jan 21, 2016 11:11 pm
Location: outside the echo chamber

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

Post by whodidntante » Thu Jan 17, 2019 10:40 pm

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!

User avatar
Dale_G
Posts: 3273
Joined: Tue Feb 20, 2007 5:43 pm
Location: Central Florida - on the grown up side of 82

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

Post by Dale_G » Thu Jan 17, 2019 10:57 pm

Oh woe! No help for the poor folks who have to withhold 110%.
Volatility is my friend

JGoneRiding
Posts: 1809
Joined: Tue Jul 15, 2014 3:26 pm

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

Post by JGoneRiding » 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!

AlphaLess
Posts: 1621
Joined: Fri Sep 29, 2017 11:38 pm
Location: Kentucky

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

Post by AlphaLess » 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%?
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.

terran
Posts: 1018
Joined: Sat Jan 10, 2015 10:50 pm

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

Post by terran » Fri Jan 18, 2019 7:52 am

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).

Bacchus01
Posts: 3182
Joined: Mon Dec 24, 2012 9:35 pm

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

Post by Bacchus01 » Fri Jan 18, 2019 8:02 am

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.

FactualFran
Posts: 938
Joined: Sat Feb 21, 2015 2:29 pm

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

Post by FactualFran » Fri Jan 18, 2019 2:58 pm

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.

Olemiss540
Posts: 1137
Joined: Fri Aug 18, 2017 8:46 pm

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

Post by Olemiss540 » 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%"?
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

Topic Author
NotWhoYouThink
Posts: 2755
Joined: Fri Dec 26, 2014 4:19 pm

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

Post by NotWhoYouThink » 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.

Olemiss540
Posts: 1137
Joined: Fri Aug 18, 2017 8:46 pm

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

Post by Olemiss540 » Fri Jan 18, 2019 7:20 pm

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,
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

User avatar
gasdoc
Posts: 1748
Joined: Mon Nov 03, 2014 8:26 am

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

Post by gasdoc » 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
Last edited by gasdoc on Sat Jan 19, 2019 8:35 am, edited 1 time in total.

terran
Posts: 1018
Joined: Sat Jan 10, 2015 10:50 pm

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

Post by terran » 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.

User avatar
gasdoc
Posts: 1748
Joined: Mon Nov 03, 2014 8:26 am

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

Post by gasdoc » Sat Jan 19, 2019 8:36 am

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

TexTaxToo
Posts: 15
Joined: Sun Jan 27, 2019 7:14 pm

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

Post by TexTaxToo » Mon Feb 11, 2019 8:02 pm

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.

kaneohe
Posts: 5956
Joined: Mon Sep 22, 2008 12:38 pm

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

Post by kaneohe » Mon Feb 11, 2019 8:38 pm

The 85% rule applies for estimated taxes regardless of their timing if they were paid by the Q4 deadline? Normally they require equal installments.

TexTaxToo
Posts: 15
Joined: Sun Jan 27, 2019 7:14 pm

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

Post by TexTaxToo » Wed Feb 13, 2019 4:00 pm

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".

FactualFran
Posts: 938
Joined: Sat Feb 21, 2015 2:29 pm

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

Post by FactualFran » Wed Feb 13, 2019 4:43 pm

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.

boomer_techie
Posts: 193
Joined: Fri Jan 18, 2019 6:47 am

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

Post by boomer_techie » Wed Feb 13, 2019 5:00 pm

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.

TexTaxToo
Posts: 15
Joined: Sun Jan 27, 2019 7:14 pm

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

Post by TexTaxToo » 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.)

slamfire
Posts: 29
Joined: Thu Mar 30, 2017 7:35 am

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

Post by slamfire » Mon Mar 25, 2019 10:41 am

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.

gokartmozart
Posts: 24
Joined: Thu Jan 17, 2019 4:32 pm
Location: Pacific NW, USA

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

Post by gokartmozart » Mon Mar 25, 2019 1:20 pm

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.

Post Reply