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IRS reduces estimated tax penalty threshold to 80%


The IRS has reduced the estimated tax payment threshold from the 85% originally announced in January to 80% for purposes of waiving underpayment of estimated tax penalties for the 2018 tax year. (IRS Notice 2019-25) Normally, a taxpayer must pay at least 90% of the current year’s tax to avoid a penalty.

Note: The estimated tax underpayment waiver for taxpayers who pay at least 100% of their prior-year liability (110% for taxpayers with AGI exceeding $150,000 or $75,000 for MFS) still applies as well.

According to the IRS, the waiver computation will be integrated into commercially available tax software and reflected in an upcoming revision of Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, and its instructions. Taxpayers who already paid the underpayment penalty may request a refund by filing Form 843, Claim for Refund and Request for Abatement, and state “80% of waiver of estimated tax penalty” on Line 7.

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