Underpayment penalty relief now automatic for eligible filers

By Dave Strausfeld, J.D.

Some taxpayers who were eligible for but did not claim a waiver of underpayment of estimated tax penalties in 2018 will receive refund checks because those penalties will be automatically waived, the IRS announced Wednesday (IR-2019-144).

Earlier this year, the IRS announced it would waive the penalty for taxpayers whose total withholding and estimated tax payments made on or before Jan. 15, 2019, equaled or exceeded 80% of the tax shown on that individual’s return for the 2018 tax year (Notice 2019-25). Eligible tax filers who desired a waiver were required to submit with their return a Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts. Many taxpayers eligible for a waiver of the penalty did not claim the waiver

The automatic waiver applies to any individual taxpayer who paid at least 80% of their total tax liability through federal income tax withholding or quarterly estimated tax payments but did not claim the special waiver available to them when they filed their 2018 return earlier this year

Eligible tax filers who have already paid the penalty will be sent CP21 notices and refund checks over the next several months, regardless of whether they requested penalty relief. There is no need to contact the IRS or take any other action to receive this refund, the agency said.

The underpayment penalty waiver is the IRS’s response to concerns that individual taxpayers may have found it difficult to correctly estimate their 2018 tax liability because of the numerous changes enacted in the law known as the Tax Cuts and Jobs Act, P.L. 115-97.

The automatic waiver is designed to “provide relief to any person who filed too early to take advantage of the waiver or was unaware of it when they filed,” IRS Commissioner Chuck Rettig said in the news release.

For those who have yet to file, the IRS “urges every eligible taxpayer to claim the waiver on their return,” the news release says.

Dave Strausfeld, J.D., (David.Strausfeld@aicpa-cima.com) is a Tax Adviser senior editor.

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