Estimated Tax Penalty Waiver for 2018

By Kaye A. Thomas
Current as of January 21, 2019

For 2018 only, the IRS will waive the penalty for underpayment of estimated tax if you paid at least 85% through withholding and estimates.

If your income tax withholding isn’t enough to cover your tax liability, you may have to make quarterly payments of estimated tax. A penalty may apply if your payments for any quarter fall short of that period’s requirement. Recognizing that the many tax law changes taking effect in 2018 would make it harder for taxpayers to estimate their tax accurately that year, the IRS announced certain taxpayers can obtain a waiver of the penalty by filing Form 2210. The only requirement is to have made total withholding and estimate tax payments on or before January 15, 2019 equal to or greater than 85% of the tax shown on your 2018 tax return.

Under the normal rules, someone whose total payments for the year are adequate can still incur a penalty if payments for one or more of the earlier quarters fell short of the requirement for those periods. For 2018 this is not the case. If your total payments by January 15, 2019 cover 85% or more of the tax, you won’t have a penalty for any quarter, regardless of when you made the payments.

It literally would have been possible to avoid the penalty while making no estimated tax payments at all until January 15, 2019, when you paid a lump sum covering 85% of your tax for the entire year. We note that the IRS announced the availability of this relief just after January 15.

Form 2210 required

Form 2210
Check Box A and write “85% Waiver”

To obtain the waiver you have to file page 1 of Form 2210. Fill out Part I, check Box A  in Part II, and write “85% Waiver” next to that box. There’s no need to fill out or file the rest of this form.

Payments below 85%

If your payments fall below 85%, this waiver has no effect. Each quarter for which you have a shortfall will incur a penalty, and the amount of the penalty will be determined under the usual rule, which requires that you pay 90% of the tax unless an exception applies.

Related

Guide to Estimated Tax

Form 2210

Form 2210 Instructions

IRS Notice 2019-11