Tax calculator

Since the 2018 tax season is officially over for most people, the Internal Revenue Service is urging taxpayers to check their federal withholdings to avoid a tax surprise come next year, especially those who are currently facing a tax bill. 

And for the people who owe the feds this year, the IRS recommends filing as soon as possible and paying as much of their bill in order to mitigate further penalties. People who will see a tax return in 2018 won’t be penalized for filing late, but are still expected to file.

Filings were due on April 15 in every state except for Maine and Massachusetts, which had two additional days due to Patriot’s Day.

In light of the federal tax overhaul, the IRS suggests that taxpayers complete a “paycheck checkup” early this year. The federal Tax Cuts and Jobs Act, which was signed into law in December 2017, aimed to simplify individual filings, slash the federal corporate tax rate and offer temporary tax breaks for comparatively small businesses. 

According to the IRS, the best time to complete a “paycheck checkup” is as early in the year as possible, in order to make any appropriate changes. A change in federal tax law also is a good time to check withholdings. Similarly, the feds recommend taxpayers monitor withholdings when they undergo a lifestyle change like getting married/divorced, their spouse changes jobs or they earn on taxable income not subject to withholdings like interest, dividends and capital gains. 

The IRS website offers a withholdings calculator that can help most workers determine whether they’re on track, or need to file a new Form W-4. People filing more complex returns—those who owe self-employment tax, the alternative minimum tax or tax on unearned income from dependents—can utilize the Publication 505 tool instead. 

In March, the IRS expanded its penalty relief threshold for taxpayers who fell short on meeting their annual tax liability. The department is waiving the estimated tax penalty for taxpayers who paid at least 80 percent of their federal tax bill last year. Typically the the threshold is 90 percent, which was decreased due to the overarching changes in federal tax code. 

That month, IRS Commissioner Chuck Rettig said this year’s unique situation prompted the adjustment.  

“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,” Rettig said. “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.”

For people who have yet to file their federal returns, here’s a breakdown of common IRS penalties. 

Taxpayers who fail to file by April 15 will be penalized 5 percent of their tax liability each month for up to five additional months. Even if someone is approved for a filing extension, back taxes are due in April. Approved extensions give citizens until Oct. 15 that same year to complete their federal return.

And for anyone filing a federal return more than 60 days after the April deadline, the minimum fine is $210 or 100 percent of taxes owed, whichever is less.   

Failing to pay your tax bill by April 15 will accrue a late payment fee equal to half a percent of the amount owed. That fee is tallied each month for up to five months. 

For any month that a taxpayer is facing a failure to file penalty as well as the late payment fee, the latter is waived.

Taxpayers who have at least a three-year history of filing  and paying their federal tax liability on time often qualify for penalty relief.

The IRS furthermore advises taxpayers to be aware of various scams during and just after tax season. The IRS will never make an initial, unsolicited contact via email, text or social media on filing, payment or tax refund issues, according to a department press statement. Any tax related correspondence will be delivered via the United States Postal Service exclusively. 

Federal withholdings are based on the amount of income earned and personal allowances such as being single/married, having dependent children or whether you will itemize personal deductions instead of claiming the recently revised standard deduction.

The federal government recommends contacting a tax professional for pressing issues and concerns with annual filings.