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5 IRS Penalties Changed Under The Tax Cuts And Jobs Act Of 2018



This post contains cocktail party killer one liners about how 5 IRS Penalties Changed Under the Tax Cut and Jobs Act of 2018.

My editor also quipped that reading this post helps with insomnia as well. So if you are looking to either kill a party and/or fall asleep faster please continue reading.

If you are a tax practitioner however, you better know this stuff and with all due respect – most do NOT.

The 5 big changes are summarized as follows:

  1. Paid income tax preparers must conduct due diligence for the Head of household filing status claim under  Code Sec. 6695(g)
  2. Shared responsibility payment (penalty) eliminated AFTER 2018 BUT is still applied in 2017
    • The net result of these changes is that no shared responsibility payment will be required after 2018, nor will there be any penalty imposed for failing to maintain minimum essential coverage for months beginning after Dec. 31, 2018.
    • For individuals who do not have the required health coverage in 2018, the minimum annual penalty is $695 per adult and $347.50 for each child under 18.
    • The maximum annual penalty can be substantially higher based on household income.
    • The penalty applies for each month for which the required coverage is not in place, and is based on 1/12 of the annual penalty amount.
    • Certain individuals may be exempt based on household income or other factors.
    • Starting in 2019, the individual mandate should no longer be a factor in your health care planning.
  3. Denial of deduction for fines, penalties, etc., is broadened under Code Sec. 162(f) the new provision denies deductions for payments to, or at the direction of, a government or governmental entity.  There are generally 3 exceptions including:
    • amounts constituting restitution,
    • certain court-ordered amounts,
    • taxes due.
  4. Penalty imposed for employer’s failure to notify employee that stock is eligible for Code Sec. 83(i) election relevant to qualified equity grants
    • The amount of the penalty is $100 per failure, up to a maximum penalty of $50,000 for all failures by a person during a calendar year.
    • The penalty won’t be imposed for a failure that’s shown to be due to reasonable cause and not to willful neglect.
    • The penalty is paid in the same manner as tax, on notice and demand by IRS.
  5. Information reporting requirements are added for government and other agencies that receive fines, penalties, etc., of $600 or more for law violations. Specifically, an ‘appropriate official’ of any government entity involved in a suit or agreement  must file a return with IRS detailing:
    • the amount required to be paid as a result of a suit or agreement
    • any amount required to be paid as a result of the suit or agreement which constitutes restitution or remediation of property, and
    • any amount required to be paid as a result of the suit or agreement for the purpose of coming into compliance with any law which was violated or was involved in the investigation or inquiry.
    • The report must separately identify any amounts that are for restitution or remediation of property, or correction of noncompliance and applies.

Have a question? Contact John Dundon.

Your comments are always welcome!

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I am enrolled with the United States Treasury Department to practice before the IRS, governed by rules stipulated in United States Treasury Circular 230. As a Federally Authorized Tax Practitioner and a tax appeals specialist my Enrolled Agent License #85353 is issued by the United States Treasury. With this license I work for U.S. taxpayers everywhere to resolve tax matters and de-escalate stress about taxes or tax disputes for individuals and corporations with federal and state issues.

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