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Individual Tax

Farmers and fishermen given estimated tax penalty relief

Thomson Reuters Tax & Accounting  

· 5 minute read

Thomson Reuters Tax & Accounting  

· 5 minute read

Notice 2019-17, 2019-12 IRBIR 2019-24, 2/28/2019;

In a Notice and accompanying Information Release, IRS has announced that it will waive the estimated tax penalty under Code Sec. 6654 for qualifying farmers or fishermen who file their 2018 federal income tax return and pay any tax due by Monday, Apr. 15, 2019 (Wednesday, Apr. 17, 2019, for taxpayers residing in Maine or Massachusetts).

Background. Code Sec. 6654 provides that, in the case of an individual, estimated income tax is required to be paid in four installments with each being 25% of the required annual payment. Individual taxpayers who fail to make a sufficient and timely payment of estimated income tax are liable for an addition to tax under Code Sec. 6654(a).

However, qualifying farmers and fishermen are subject to special rules requiring them to make only one installment payment due on January 15 of the year following the tax year. (Code Sec. 6654(i)(1)(A)Code Sec. 6654(i)(1)(B)) A taxpayer qualifies as a farmer or fisherman for the 2018 tax year if at least two-thirds of the taxpayer’s total gross income was from farming or fishing in either 2017 or 2018. (Code Sec. 6654(i)(2))

Qualifying farmers and fishermen who did not make the required estimated tax installment payment by Jan. 15, 2019, are not subject to an addition to tax for failing to pay estimated income tax if they file their returns and pay the full amount of tax reported on the return as payable, by Mar. 1, 2019. (Code Sec. 6654(i)(1)(D))

IRS is authorized to waive the Code Sec. 6654 addition to tax for an underpayment of estimated tax in unusual circumstances to the extent its imposition would be against equity and good conscience. (Code Sec. 6654(e)(3)(A))

Relief. IRS will waive the estimated tax penalty for any qualifying farmer or fisherman who files his or her 2018 federal income tax return and pays any tax due by Monday, Apr. 15, 2019. For taxpayers residing in Maine or Massachusetts, this deadline is Wednesday, Apr, 17, 2019,.

IRS is providing this relief because, due to certain changes in the rules that affect farmers and fishermen, IRS anticipates that farmers and fishermen may have difficulty accurately determining and paying their tax liability for the 2018 tax year by Mar. 1, 2019.

To be eligible for the waiver, qualifying taxpayers must attach Form 2210-F (Underpayment of Estimated Tax by Farmers and Fishermen) to their 2018 income tax return. This form can be submitted either electronically or on paper. The taxpayer’s name and identifying number (usually a Social Security number) must be entered at the top of the form. The waiver box (Part I, Box A) should be checked. The rest of the form should be left blank.

References: For estimated tax rules for farmers and fisherman, see FTC 2d/FIN ¶S-5237United States Tax Reporter ¶66,544.06.

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