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Blogging Beyond the Numbers

Automatic 2018 Individual Estimated Tax Penalty Relief
Posted by: Katy Mering 3 months ago

The IRS announced that for 2018 tax returns already filed, the relief from the underpayment of estimated taxes would be automatically granted, even if the return as filed did not properly claim the relief.

FACTS:

In 2018 the withholding tables were changed due to the Tax Cuts and Jobs Act.  It was estimated that nearly 30 million taxpayers could be under withheld.

To avoid an underpayment penalty a taxpayer must pay through withholding or four installments that equal 25% of either 90% of the tax shown on the 2018 return or 100% of a valid prior-year return.

CHANGES:

In January of 2019, the 90% requirement was reduced to 85% with NOTICE 2019-11. Relief was to be requested on form 2210.  If the tax return was already filed a taxpayer was to file form 843, Claim for Refund and Request for Abatement.

In March of 2019, the 85% was lowered to 80%, with the same filing rules as in the previous notice

NEWEST CHANGE:

IRS has now announced that the relief provided in the previous two notices will apply automatically to taxpayers who have already filed their returns.  Taxpayers do not need to request penalty relief.  The IRS over the next few months will mail notice CP-21 to affected taxpayers and checks should be received about 3 weeks later.

Extended 2018 tax returns should use the waiver built into software or attach Form 2210 and claim penalty relief.

NOTE:   2018 tax returns prepared by Wegner CPAs should have followed the rules in place at the time the 2018 return was filed (resulting in a reduced or no underpayment penalty, accordingly). 

Please call your tax professional at Wegner CPAs if you have any questions on this new automatic relief.

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