Sen. Wyden calls for penalty waiver for under-withheld taxpayers

January 7, 2019

By Michael Cohn at Accounting Today on January 3, 2019

Senator Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee, sent a letter Thursday to Internal Revenue Service Commissioner Charles Rettig asking the IRS to waive the penalties associated with surprise tax bills that he expects to hit millions of workers and families when they file their taxes this year, thanks to the changes in the Tax Cuts and Jobs Act.

The Government Accountability Office estimated in a report last year that nearly 30 million taxpayers could have under-withheld their taxes after the passage of the new tax law in December 2017. Wyden also pointed out that the partial government shutdown has left the IRS with a reduced staff, and he emphasized the need for prompt action to protect taxpayers from hefty tax bills.

In his letter to Rettig, Wyden asked how the IRS plans to respond to taxpayers who have been under-withheld and how to prevent this issue for future filing seasons.

“As you know, the 2017 tax law upended middle-class tax benefits even while promising households a massive tax refund,” Wyden wrote in his letter to Rettig. “While the tax law expanded the Child Tax Credit and standard deduction, it also repealed personal exemptions and many itemized deductions and capped the state and local income tax deduction at $10,000. Republicans also rushed their tax bill’s implementation, insisting on a start year of 2018 for a bill they had barely completed at the end of 2017. As a result, Treasury had to jury-rig the current withholding allowance instead of properly revising the W-4 so that employees could update the number of allowances they claim with their employers.”

Wyden pointed out that many taxpayers would not have followed the IRS’s suggestion that they use a withholding calculator on the IRS website to adjust their withholding amount.

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