Judy Chu Intros Bill to Shield Families from Under-Withholding Penalties
Congresswoman Judy Chu (D-CA) reintroduced legislation that would shield taxpayers from withholding penalties for the 2018 filing year should they find themselves to be under-withheld due to the rushed changes made in the Republican tax law. Because of the new IRS withholding tables, and the fact that many taxpayers did not adjust their withholding, the General Accounting Office found that 30 million filers, or 1 in 5 taxpayers, will find that they owe the IRS this year. H&R Block found that only 1 in 5 people adjusted their Form W-4 after the passage of the law. On January 16, 2019, the IRS expanded penalty relief for all taxpayers who paid at least 85% of their tax due for the current year. However, as filing season has begun, it is clear that further relief is needed. “As tax filing season begins, I have been hearing from constituents shocked to discover they owe the government money, especially when they were expecting a refund as in past years,” Chu said. This is through no fault of their own, as many relied on the IRS’s updated withholding tables to ensure they paid their tax liabilities. There is no reason that complying taxpayers should face penalties because the GOP tax law was so rushed that the rest of the country was left without time to understand its implications. The Taxpayer Penalty Protection Act would create a one-time safe harbor to protect individuals and small businesses against the Failure to Pay Estimated Tax Penalty if the amount of taxes paid is at least 80% of the taxes owed for all taxpayers in the current year. The bill would also waive penalties if the taxpayer withheld 80% of their tax liability from the prior year (AGI under $150,000), and 100% of their tax liability from the prior year (AGI over $150,000). Chu and Congressman John Lewis (D-GA) also sent a letter last week to TreasurySecretary Steven Mnuchin and IRS Commissioner Charles Rettig requesting additional relief for taxpayers who unintentionally under-withheld their income taxes in 2018. More here.