IRS Payment Plans and New State Withholding Forms

2018 tax season is underway and the Tax Cuts and Jobs Act is impacting most taxpayers, but not always in a positive way. Many taxpayers are finding they did not have enough taxes withheld from their 2018 paychecks and they now owe federal tax. States whose income tax calculation accounts for federal taxes withheld, such as Oregon, are also noticing unintended consequences of the new federal tax laws and have released state specific withholding forms to help employees more accurately withhold taxes from their paychecks.

It is anticipated most taxpayers will see a decrease in their federal tax liability, due to the new tax changes. However, there are some who may see an increase and not have paid enough in taxes throughout the year. The IRS offers a penalty waiver for taxpayers who paid at least 90 percent of their tax liability during the year. In January, the IRS announced they would extend the penalty waiver to taxpayers who paid at least 85 percent of their 2018 tax liability.

The IRS urges taxpayers who have a tax balance due to file their returns by the April 15th deadline. Taxpayers should pay as much of the outstanding tax as possible at the time of filing and make arrangements with the IRS to pay the remaining balance. The IRS offers several payment plan options including online payment plans and installment agreements which allow taxpayers to pay their outstanding taxes over an agreed upon amount of time.

Taxpayers are encouraged to check their withholding using the IRS' withholding calculator to ensure they withhold enough taxes for 2019. Taxpayers can find answer to questions about their tax returns and the new tax laws in Publication 17: Your Federal Income Tax.

Several states who previously used the federal Form W-4 for state withholding purposes have responded to the Tax Cuts and Jobs Act by releasing state specific withholding forms. Oregon and Montana were among the states who released state specific withholding forms for 2019. Both states recommend the new form be completed by all new hires and any current employees who owe taxes for 2018.