TAS Tax Tip: Updates to Estimated Tax Penalty Waiver

April 23, 2019

Update (Aug. 22, 2019)

The IRS recently announced a penalty waiver for the estimated tax penalty taxpayers who already filed their 2018 federal income tax returns but did not claim the waiver. The IRS will automatic apply this waiver to tax accounts of all eligible taxpayers, so there is no need to contact the IRS to apply for or request the waiver. Over the next few months, the IRS will mail copies of notices CP 21 granting this relief to affected taxpayers. Any eligible taxpayer who already paid the penalty will also receive a refund check about three weeks after their CP21 notice regardless if they requested penalty relief.

For those yet to file, the IRS urges every eligible taxpayer to claim the waiver on their return; this includes those with tax-filing extensions due to run out on Oct. 15, 2019. Follow the instructions below for filing Form 2210 with your tax return.

If you have not done so, check your tax withholding now before it’s too late for your 2019 tax return.

The April 15th tax deadline has passed, however the IRS announced on March 22, 2019 that it is expanding the waiver of the Estimated Tax Penalty to include relief for taxpayers whose total withholding and estimated tax payments equal or exceed 80 percent of the tax shown on the return for the 2018 taxable year. This threshold was reduced from the 85 percent threshold in Notice 2019-11, Relief from Addition to Tax for Underpayment of Estimated Income Tax by an Individual. The waiver is in addition to any other exception to underpayment of estimated income tax provided in IRC § 6654.

If You Have Not Filed Yet, Complete Form 2210 With Form 1040

To request relief under the expanded Estimated Tax Penalty waiver, taxpayers who haven’t yet filed their 2018 federal income tax return must attach a completed Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to their tax return upon filing. The form can be filed with a return electronically or via paper. These taxpayers should include the statement “80% Waiver” next to Box A of the Form 2210, as instructed in Notice 2019-25, Relief from Addition to Tax for Underpayment of Estimated Income Tax by an Individual.
 

If You Have Already Filed Your Tax Return and Paid the Penalty But You Would Not Be Subject to a Penalty Under the 80 Percent Threshold, File Form 843 to Claim a Refund

Taxpayers who have already filed their 2018 federal income tax returns and paid an Estimated Tax Penalty because their withholding and estimated tax payments fell below the 85 percent threshold provided in Notice 2019-11, but who now qualify for the expanded Estimated Tax Penalty waiver, should file Form 843, Claim for Refund and Request for Abatement. These taxpayers should include the statement “80% Waiver of estimated tax penalty” on Line 7 of Form 843, as instructed in Notice 2019-25.

If You Have Already Filed and Were Subject to the Penalty, but You Did Not Claim a Waiver on the Form 2210, You Can Call the IRS

Taxpayers who didn’t request a penalty waiver when filing Form 2210 or didn’t file Form 2210 with their original 2018 federal income tax return can request the penalty to be waived by calling the IRS. These taxpayers can call the toll-free number, (800) 829-1040, and request relief from the penalty.  

The IRS urges everyone to review their withholding for 2019 so as to not face unexpected tax bills when filing their returns next year. See Notice 2019-25 and Form 2210 Instructions for more details.

Other Taxpayer Advocate Service Resources: