IRS expands penalty waiver for under withholding
Thursday, April 4, 2019

IRS expands penalty waiver for under withholding

By Payroll and Entitlements Editorial Staff

The IRS has provided additional relief to individual taxpayers by expanding the waiver of the addition to tax under Code Sec. 6654 for the underpayment of estimated income tax for certain individuals who would otherwise be required to make tax year 2018 estimated income tax payments on or before January 15, 2019. The expanded relief is meant to help taxpayers who did not properly adjust their withholding and estimated tax payments to reflect an array of changes under the Tax Cuts and Jobs Act (TCJA) (P.L. 115-97). the far-reaching tax reform law enacted in December 2017.

Estimated penalty waiver. The IRS is now waiving the estimated tax penalty for any taxpayer who paid at least 80% of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. This means that a taxpayer will not owe a penalty if they paid at least 80% of their total 2018 tax liability. If the taxpayer paid less than 80%, then they are not eligible for the waiver and the penalty will be calculated as it normally would be, using the 90 percent threshold. The waiver is in addition to any other exception that Code Sec. 6654 provides to the underpayment of estimated income tax.

Procedure for waiver request. To request the waiver, an individual Is required to file Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, with his or her 2018 income tax return. The form can be filed with a return filed electronically or on paper. Taxpayers should complete Part I of Form 2210 and the worksheet included in the form instructions to determine if the waiver in this notice applies. If the waiver applies, check the waiver box (Part II, Box A), include the statement “80 Percent Waiver” next to Box A, and file page 1 of Form 2210 with the return.

Claiming the refund. Taxpayers who qualify for relief under this notice may have already paid additions to tax under Code Sec. 6654 for tax year 2018. To claim a refund of the additions to tax under Code Sec. 6654 for the 2018 tax year, the taxpayer should file Form 843, Claim for Refund and Request for Abatement. Taxpayers should complete the form and include the statement “80 Percent Waiver of estimated tax penalty” on Line 7.

If waiver or procedure do not apply. If neither the waiver provided by this notice nor any other exception applies to an individual taxpayer, the amount of any addition to tax is determined by applying the underpayment interest rate established under Code Sec. 6621 to each required installment of estimated tax that was underpaid for the period that the installment is underpaid. The period of the underpayment runs from the due date for the installment to the earlier of April 15, 2019, or the date on which the underpayment is paid. (IRS Notice 2019-25, IRB 2019-15 dated April 8, 2019; IRS News Release IR-2019-55, March 22, 2019.)

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