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IRS Announces Automatic Waiver for Estimated Tax Penalty

Posted by Jonathan Ciccotelli on Aug 27, 2019 9:04:19 AM

On August 14, 2019, the IRS announced it would waive estimated tax penalties for eligible 2018 taxpayers.  This will effect around 400,000 tax filers who have already filed their 2018 federal tax return according to the IRS.

IRS Announces Automatic WaiverIf you have already filed your 2018 federal tax return and are eligible for the waiver, there is no need to contact the IRS or apply for the waiver.  The waiver will automatically be applied to your tax account by the IRS. 

At the beginning of the year, the penalty threshold was 90%.  The threshold was initially reduced to 85% January 16, 2019.  On March 22, 2019, the IRS reduced the threshold again to 80%.  The lowering of the penalty threshold is meant to help assist taxpayers who fell short of their total 2018 tax liability through estimated tax penalties and withholdings according to the IRS.  In addition, the IRS has removed the requirement that estimated tax payments are to be made in four equal installments.  These payments were to be made by January 15, 2019.

Only individual taxpayers who paid 80% of their total tax liabilities through federal income tax withholding or estimated tax payments and have not already claimed the special waiver when their 2018 tax return was filed are eligible for the automatic waiver.

Refunds Planned for Eligible Taxpayers Who Paid Penalty

There is no need to contact the IRS.  The IRS will issue CP 21 notice over the next few months to affected taxpayers who are eligible for this penalty relief.  A refund check will arrive to eligible taxpayers within three weeks of receiving the CP 21 notice whether they requested the penalty relief or not.  If an eligible taxpayer has already filed their 2018 tax return but did not request the penalty waiver, there is no need to take any further action.

For those eligible taxpayers who have extended their tax returns to October 15, 2019 or have not filed their tax return yet, The IRS encourages you to claim this waiver on your 2018 tax return.  Electronically filing your tax return is the most convenient way to file your return and claim this waiver on their return.  Tax software packages have the waiver computation already in their software.  For those taxpayers who decide to paper file their tax return and are eligible for this tax relief, Form 2210 must be filled out and attached to your 2018 tax return.  Details for filling out Form 2210 can be found in the instruction sheet of this form.  Form 2210 as well as the instructions for filling the form out can be found on the IRS website.

All tax obligations are due before the end of the year as the U.S. tax system is a pay-as-you-go system.  Taxpayers can achieve this by having tax withheld from paychecks, pension payments or Social Security benefits, making estimated tax payments or a combination of these methods.

If you have questions, please reach out to us. We will connect you with one of our professionals who can address your concerns.

Topics: Tax Planning & Strategies

Jonathan Ciccotelli

Jonathan Ciccotelli

Jonathan Ciccotelli is the Partner-In-Charge of Meaden & Moore’s Tax Services Group. For over 29 years, Jonathan has worked closely with private and public companies in manufacturing, transportation, distribution, construction, and retail under a variety of business structures, including S-corporations, C-corporations, consolidated groups, and limited liability companies. He enjoys running, cycling, and cheering on his kids at sporting events.

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