Taxpayers urged to avoid penalty for tax underpayment

The IRS advised taxpayers to plan ahead and understand their options in order to avoid a penalty for underpayment of tax when they file early in 2019. The guidance is part of the Service’s broader “Paycheck Checkup” campaign to encourage taxpayers to check their tax situation, including withholding and estimated tax payments. Taxpayers can make use of a variety of tools and resources, including the Withholding Calculator, to determine if they need to make an additional tax payment to avoid an unwelcome surprise at tax time. To use the Withholding Calculator most effectively, taxpayers should have a copy of last year’s tax return and recent paystubs.

Taxpayers who are self-employed or have other income, such as interest, dividends, capital gains, prizes and awards, or have too little tax withheld from wages may need to make estimated or additional tax payments. Further, estimated tax is used to pay not only income tax but other taxes such as self-employment tax and alternative minimum tax. Taxpayers can also adjust withholding on their paychecks or the amount of their estimated tax payments to help prevent penalties.

For 2018, the remaining payments are due September 17, 2018, and January 15, 2019. Those who make estimated payments may be charged a penalty if those payments are late. Finally, taxpayers can visit IRS.gov/payments for information on easy and secure ways to pay taxes. (IRS News Release, IR-2018-179, September 6, 2018.)

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