Additional Form 2210 Relief

The IRS has announced additional relief for some taxpayers who might otherwise be subject to the penalty for underpayment of estimated taxes.

As discussed in our January 16, 2019 post, the IRS had previously provided relief for some individual taxpayers who may have insufficient withholding due to changes made by the Tax Cuts and Jobs Act and the revised withholding tables issued shortly after the law was enacted.

On March 22, 2019, the IRS provided additional penalty relief in IR-2019-55.  To be eligible for the additional relief, a taxpayer’s 2018 federal withholding (and/or timely-paid 2018 estimated tax payments that were made on or before January 15, 2019) must equal or exceed 80% of the tax shown on the 2018 Form 1040.  (Usually, taxpayers must have payments that equal or exceed 90% of the tax shown on the return, and the previous relief announced on January 16, 2019 reduced the threshold to 85%; as a result, this new relief further cuts the threshold from 85% to 80%.)

Since this change comes late in tax season, some taxpayers who could have benefited from this additional relief have already filed their returns.  Unfortunately, the IRS is not providing such taxpayers with an automatic way to obtain this relief.  Rather, such taxpayers must follow a burdensome procedure to claim the relief.

Taxpayers who have already filed their tax returns for the 2018 tax year and qualify for this new relief provision can claim a refund by filing Form 843, Claim for Refund and Request for Abatement.  Filers of this form should include the statement “80% Waiver of estimated tax penalty” on Line 7.  Form 843 cannot be filed electronically, so it must be filed on paper.

Practitioners should make sure that they do not file affected tax returns until their tax software is updated to reflect the new relief provision.  In addition, they should consider whether it will be cost effective for clients to claim the relief for tax returns that were already filed.  As a practical matter, this consideration should occur after the April 15 filing due date.