Each year taxpayers must remit the lesser of 90% of their estimated current year income tax liability or 100% (110% if AGI > $150,000) of their prior year income tax liability. Doing so meets the safe harbor requirement thus eliminating penalties for failing to meet the statutory minimum remittance requirement.
Ignorance of the Law is a legal principle holding that a person who is unaware of a law may not escape liability for violating that law merely because he or she was unaware of its content. It applies to all laws ranging from minor civil offenses to the most heinous criminal offenses . . . as well as tax laws.
But what if ignorance is repackaged as confusion? Sounds like just the type of thing that will make happy Senator Chuck Grassley and Senator Ron Wyden – the highest-ranked Republican and Democrat respectively on the Senate Finance Committee – who took to the floor of the Senate and implored the IRS to ignore the law.
Here’s the problem:
The Trump tax cuts ushered in commensurate cuts to payroll withholding. While many workers will see their total liability decrease they may pay more in April to bridge the gap between lowered withholding and total tax liability.
Most taxpayers were (and continue to be) unaware that tax cuts came with reduced withholding. Ignorance? That’s a penalty. Confusion? No penalty . . . because in response to the, um, “confusion” the IRS has agreed to be lenient. Instead of enforcing the aforementioned 90% statutory minimum penalties will be waived for taxpayers meeting a lowered 85% standard.
Cool, right? Sure, no one ought to be penalized when it’s genuine oversight. However the precedent is a dangerous one. It’s the proverbial slippery slope. When legislators arbitrarily ignore the law there’s nothing to stop future nefarious taxpayer action and then claim “confusion” about the law.
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