March 06, 2019

With Tax Season In Full Swing, Gillibrand Introduces Taxpayer Penalty Protection Act To Protect Families From Unfair Penalties Caused By Changes Made Under The Trump Tax Law

Many Families Across New York State and the Country Are Facing A Smaller Tax Refund and Higher Tax Bills Due to Changes Made in the Trump Tax Plan;Gillibrand’s Legislation Would Erase Unfair Penalties for Taxpayers Who Play by the Rules

Washington, DC – With families across New York State and the country facing smaller tax refunds and higher tax bills due in part to changes made in the 2017 Trump tax law, U.S. Senator Kirsten Gillibrand today introduced the Taxpayer Penalty Protection Act, legislation that would erase penalties for some families who unknowingly under-withheld their income taxes throughout the year. In 2018, the Internal Revenue Service (IRS) issued new withholdings schedules meant to reflect changes in the 2017 Trump tax bill. However, in many cases, the amount of tax withheld from people’s paychecks was less than the amount of taxes owed, resulting in withholding penalties. Gillibrand’s legislation would protect Americans from withholding penalties if the amount of taxes paid was at least 80% of the taxes owed for the current year.

“It’s clear that the Trump tax law was a giveaway to the biggest corporations and the richest Americans at the expense of hardworking families all over our state. Now that tax filing season is here, I am hearing from families all over New York that their year-end tax bill is higher than normal, and they are getting hit with a penalty because the Trump Administration told them to withhold less money than they were supposed to,” said Senator Gillibrand. “Congress needs to get to the bottom of whether this was a deliberate and deceptive act by the Trump Administration to make its tax law look better than it actually is, but in the meantime, no one playing by the rules should have to pay a penalty because of this Administration’s incompetence or dishonesty. I’m proud to introduce the Taxpayer Penalty Protection Act, which would erase the penalties for taxpayers who were under-withholding at no fault of their own. I urge all of my colleagues to support this bill, and I will always fight to make sure hardworking New Yorkers and all Americans have every opportunity to succeed.”

“Tax reform should help grow the middle class, but it’s clear from the stories we’ve heard so far this tax filing season that those middle class families are the ones stuck with a bill instead of the refund they were expecting. This is through no direct fault of their own, as many relied on their previous withholding calculations and IRS’s updated withholding tables to ensure they paid their tax liabilities. This bill will make a necessary fix to provide relief to those taxpayers who are subject to under-withholding penalties. I’m so appreciative to have a partner like Senator Gillibrand to help lead the way on this bill in the Senate. I hope we can move quickly to pass this legislation and get taxpayers the relief they need this filing season,” said Congresswoman Judy Chu.

Due to the new IRS withholding tables, and the fact that many taxpayers did not adjust their withholding properly to reflect actual tax liabilities, many taxpayers will find that they under-withheld and face penalties for the 2018 filing year. One GAO study found that 30 million filers, or 1 in 5 taxpayers, will find that they owe the IRS this year. Gillibrand’s legislation would provide relief for some Americans who face withholding penalties. Specifically, if taxpayers declare under $150,000 of income and paid 80 percent of the previous year’s taxable income in 2019, withholding penalty fees would be waived. The fees would also be waived for individuals who paid 100% percent of last year’s taxable income and made over $150,000. The Taxpayer Penalty Protection Act is endorsed by the American Institute of Certified Public Accountants (AICPA).

This legislation has been introduced in the House by Ways and Means Committee member Congresswoman Judy Chu.