U.S. Sen. Kirsten Gillibrand wants to prevent taxpayers from being penalized if they don't have enough federal income taxes withheld from their paychecks.
The Taxpayer Penalty Protection Act sponsored by Gillibrand, D-N.Y., would eliminate penalties for under-withholding taxes if the individual or family earning less than $150,000 paid at least 80 percent of the taxes owed for the year.
The Internal Revenue Service announced in January that it would waive penalties for under-withholding if taxpayers paid at least 85 percent of their liability.
Gillibrand's bill aims to address concerns raised by some taxpayers who learned that they would be penalized due to under-withholding income taxes. The problem stems from the Tax Cuts and Jobs Act, a 2017 federal tax law signed by President Donald Trump.
Once the measure was signed, the IRS issued new withholding tables. What some taxpayers found is that the amount of federal income taxes withheld from their paychecks was less than what they owed. Because they didn't pay enough in federal income taxes, they were subject to withholding penalties.
A Government Accountability Office study found 30 million filers will owe the IRS due to under-withholding taxes.
The American Institute of Certified Public Accountants has endorsed Gillibrand's bill.
Gillibrand, who voted against the tax law in 2017, repeated her criticisms of the measure. She called it a giveaway to large corporations and the wealthy.
"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," she said.
Gillibrand also wants Congress to investigate whether the Trump administration engaged in a "deliberate and deceptive act" to have numerous taxpayers under-withhold their income tax liability. She argued that the Trump administration could've done this to "make its tax law look better than it actually is."
There is a House version of the Taxpayer Penalty Protection Act. U.S. Rep. Judy Chu, a California Democrat, has introduced the bill in the House. Chu is a member of the House Ways and Means Committee.