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IRS Automatically Waives Estimated Tax Penalty for Eligible 2018 Tax Filers

AAFCPAs would like to make clients aware that the IRS is automatically waiving the estimated tax penalty for eligible taxpayers who already filed their 2018 federal income tax returns but did not claim the waiver. Again, this is an automatic waiver, so there is no need to contact the IRS to apply for or request the waiver.

Earlier this year, the IRS lowered the penalty assessment threshold from its usual 90% to 80% to help taxpayers whose withholding and estimated tax payments did not fully cover their 2018 tax liability. The agency also eliminated the requirement that estimated tax payments be made in four equal installments, as long as they were all made by the final estimate due date of January 15, 2019.

Who is Eligible?

The automatic waiver applies to any individual taxpayer who paid at least 80% of their total federal tax liability through a combination of 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.

The IRS will be mailing copies of Notice “CP21”—notices used by the IRS to notify you of changes to your return—granting this relief to affected taxpayers. Any eligible taxpayer who already paid the penalty will also receive a refund check about three weeks after their CP21 notice regardless if they requested penalty relief.

What Does AAFCPAs Advise?

Should you receive a CP21 notice, please send it to your AAFCPAs Tax Partner upon receipt, and prior to cashing any refund check from the IRS. We will review changes to your return to ensure your expected refund is accurate.

For clients whose returns are due by the Oct 15 extension deadline, the Tax Practice of AAFCPAs will make the appropriate waiver disclosure in the returns.

AAFCPAs reminds clients to review their withholdings for 2019. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed this year. It’s also an important step for those who made withholding adjustments in 2018 or had a major life change. Those most at risk of having too little tax withheld include those who itemized in the past but now take the increased standard deduction, as well as households with two wage earners, employees with nonwage sources of income and those with complex tax situations.

If you have any questions, please contact: Richard Weiner, CPA, MST at 774.512.4078, rweiner@nullaafcpa.com; or your AAFCPAs Partner.  We welcome the opportunity to provide strategic tax advice for you.

About the Author

Richard Weiner CPA
Rich has over 30 years of broad tax experience with a specialty in tax planning and consulting for private and publicly-held businesses. Rich has specific expertise in the Software, Bio-Technology, Medical Device, Life Science, Manufacturing, Retail, Professional Service and Publishing industries, as well as U.S. aspects of international taxation. He works extensively with European companies expanding into the U.S. market. Additional areas of focus include companies and stockholders in transition, including structuring of and planning for Mergers & Acquisitions, planning for changes in ownership and management, and adoption of tax methodologies with a view toward the long term. He is well known in his field and is a frequent speaker on a variety of tax related topics.