TAS Tax Tip: Payment and Penalty Relief Options

April 11, 2019

Tax time can be especially tough if taxes are owed with your tax return and even harder if penalties and interest are charged. Our website’s Get Help pages have a wealth of information about various payment options and will guide you through why penalties are charged and, when appropriate, how to request a reversal of those charges, along with steps you can take to avoid the same issues next year.

No IRS Payment Options

The best places to start if you can’t pay the amount you owe in full with your tax return are: I can't pay my taxes and I need help resolving my balance due. Good IRS resources include Paying Your Taxes and Tips on Payment Options, Penalty Waivers, Refunds and more.
What you need to know if you can’t pay the taxes you owe is that the IRS has payment options available. Which option might work best for you generally depends on how much you owe and your current financial situation. Each option has different requirements and some have fees.

The most important thing to remember is: take an action. By taking an action yourself, as soon as possible, you’ll keep the IRS from acting to collect the debt. Plus, the sooner you pay the balance, the less you will have to pay in penalties and interest. 

Penalties and Abatement Options

Common Penalties for Individuals include failure to file, failure to pay, and failure to pay proper estimated tax. You may qualify for relief from some penalties, if you tried to comply with the requirements of the law but weren't able to meet your tax obligations. See penalty relief for more information.

This year we want to highlight the failure to pay proper estimated tax, commonly called the Estimated Tax penalty. The tax law changed several items this past year that go into calculating how much tax is paid and how much tax was kept from paychecks. Consequently, these changes may have put more taxpayers in the scenario where they didn’t have enough tax withheld or didn’t pre-pay enough in estimated taxes and are now subject to this penalty.

For this particular penalty, the IRS has granted a special waiver that provides penalty relief to any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two.

To claim this relief you have two options: 1) File page 1 of Form 2210 (include the statement “80% Waiver” next to Box A) with your tax return. The form can be filed with a paper or electronic return, or 2) File Form 843 (include the statement “80% Waiver of estimated tax penalty” on Line 7) if you already paid an Estimated Tax penalty for 2018 and want a refund of the penalty.

How to Avoid Both a Balance Due and Penalties Next Year

To ensure you do not run into a situation where a balance is owed for this year, see the TAS Tax Tip: It’s Always a Good time to Check Your Tax Withholding and the IRS’s News release Estimated taxes form and publication can help people pay the right amount in 2019.

Other Taxpayer Advocate Service Resources: