More awesome Tax Tips from Tobi Marshall
TIPS TO AVOID 2019 TAX PENALTIES
The holiday season is upon us, complete with family gatherings, over-indulging in food and beverages, and gift shopping and giving, and the last thing most of us want to think about right now is what faces us after the New Year is rung in: tax season! But taking some time now to get in the tax-season spirit may help you to avoid or reduce certain penalties on your 2019 tax return.
Underpayment Penalty – Have you prepaid enough taxes to cover your 2019 liability? If you are an employee, you will have had income tax withheld from your paychecks, but has that withholding been sufficient? This is an especially important question if you have a second job or a side business, or if you are married and your spouse is also employed. Many times in these circumstances, your withholding for the year may not be enough to cover your 2019 tax liability. Further complicating the issue is that many individuals still haven’t adjusted their withholding with their employers to account for the numerous tax reform changes, which mostly became effective starting in 2018.
You will be hit with an underpayment penalty if your advance payments toward your 2019 tax liability, through withholding and estimated tax payments, are less than 90% of your 2019 tax or 100% (110% for high-income taxpayers) of your 2018 tax. But the good news is there is no penalty if you owe less than $1,000 in tax.
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