Automatic Waiver of Estimated Tax Penalties

August 2019 | Article

In a news release, IR-2019-144, the IRS announced on August 14 that it will automatically waive estimated tax penalties for eligible taxpayers who have already filed their 2018 federal income tax returns. Eligible taxpayers include those individuals who paid at least 80% of their total 2018 tax liability through federal income tax withholding or quarterly estimated tax payments yet self-assessed an estimated tax penalty on their 2018 returns.

Automatic Refunds
Because of this waiver, these individuals will not need to contact the IRS to apply for or request a refund of the estimated tax penalty; instead, the IRS will automatically refund the penalty amounts. According to the IRS, this affects approximately 400,000 individuals. 

Requirements Eased for 2018
In March of 2019, the IRS lowered the usual 90% penalty threshold to 80% to provide relief for those taxpayers whose withholding and estimated tax payments fell short of their total 2018 tax liability. It also removed the requirement that estimated payments be made in four equal installments if they were made by January 15, 2019. These temporary changes were made to help taxpayers who did not properly adjust their withholding and estimated tax payments during 2018 to reflect the numerous changes under the Tax Cuts and Jobs Act. 

Extended 2018 Returns and Planning for 2019
Eligible taxpayers who have not yet filed their 2018 income tax returns should claim the penalty waiver on their 2018 returns. Should you desire assistance with completing your extended 2018 return and claiming the waiver or determining the proper amount of withholding or estimated income tax payments for tax year 2019, don’t hesitate to contact an Eide Bailly tax professional.

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