The IRS is reminding taxpayers to check their tax withholding following a tax filing season that resulted in smaller refunds for many.
As a result of the 2017 tax cut legislation and IRS changes in tax-withholding tables, most taxpayers took home more money per paycheck last year, but some found that their refunds were smaller or that they owed money.
Even though the 2017 tax cut legislation increased the standard deduction and child tax credit and cut marginal tax rates, it also ended some deductions, decreased others and eliminated the personal exemption. Many taxpayers who had itemized deductions previously chose to take the standard deduction, which was doubled.
The latest IRS recommendation follows multiple reminders about withholding in 2018 and again earlier this year. In January the IRS announced it was waiving the tax penalty for taxpayers whose 2018 federal income tax withholding or quarterly estimated tax payments or a combination of both was equal to at least 85% of their total tax liability during the year, rather than the usual 90%.
At the time IRS Commissioner Chuck Rettig said, “We realize there were many changes that affected people last year, and this penalty waiver will help taxpayers who inadvertently didn’t have enough tax withheld.” He urged taxpayers to check their withholding to make sure that the right amount of tax is withheld for this tax year.