IRS Waiving Estimated Tax Penalty for 400,000 People

Chris Gaetano
Published Date:
Aug 15, 2019

The IRS has announced that it is waiving the estimated tax penalty for 400,000 people who already filed their 2018 federal income tax returns but did not claim the waiver. The IRS will apply this waiver to tax accounts of all eligible taxpayers, so there is no need to contact the IRS to apply for or request the waiver.

The IRS announced a waiver to estimated tax penalties for certain 2018 filers to help taxpayers who were unable to properly adjust their withholding and estimated tax payments to reflect an array of changes under the Tax Cuts and Jobs Act (TCJA). It said that, in general, the IRS will waive the penalty for taxpayers who paid at least 85 percent of their total tax liability last year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. The usual percentage threshold is 90 percent to avoid a penalty. A few months later, the IRS said it was further reducing the threshold from 85 to 80 percent. 

While before, taxpayers needed to apply for this waiver, now the IRS is simply going to apply it automatically. Over the next few months, the IRS will mail copies of CP21 notices  granting this relief to affected taxpayers. Any eligible taxpayers who already paid the penalty will also receive a refund check about three weeks after their CP21 notice regardless if they requested penalty relief. The agency emphasized that eligible taxpayers who have already filed a 2018 return do not need to request penalty relief, contact the IRS or take any other action to receive this relief.

"The IRS is taking this step to help affected taxpayers," said IRS Commissioner Chuck Rettig. "This 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."

Click here to see more of the latest news from the NYSSCPA.