ES Penalty in Disaster Areas

[BobKamman]

You didn't get the memo?  It says right here in the Manual that IRS issues a memo.  

20.1.3.2.7.1 (12-10-2013)

Estimated Tax Penalty and Reasonable Cause

1. The penalty for underpayment of estimated tax cannot be removed or waived for reasonable cause alone.

2. The penalty for underpayment of estimated tax generally is not waived as a result of disaster. However, in the case of a federally declared disaster area, a significant fire, or a terroristic or military action "the Secretary may specify a period of up to one year that may be disregarded" in determining whether estimated tax payments were paid on time. In these cases the IRS will issue a memo with specific instructions regarding the payment of estimated tax in the affected area.

3. Master File programming generally takes all special disaster area rules into consideration when computing the penalty for underpayment of estimated tax. Even when the taxpayer’s books and records are kept within the disaster area, while the taxpayer’s official address of record is not, manual adjustment of the penalty should not be required for taxpayers affected by a widespread disaster. See IRM 20.1.3.2.7.2.1, Federally Declared Disaster Area.

20.1.3.2.7.2 (03-31-2010)

Waivers

1. The criteria for available waivers (if any), as well as instructions for requesting a waiver, are contained in the instructions for the applicable penalty computation form (Form 2210, Form 2210-F, or Form 2220) for the given period.

2. For specific waiver criteria please refer to the form specific instructions. Also see IRC 6654 for Form 2210 and Form 2210-F, and IRC 6655 (including annotations) for Form 2220.

   Note:

    

   The estimated tax penalty for corporations generally does not qualify for a waiver, with very specific exceptions. The last time such an exception applied was 2001, when part of the penalty could be waived for corporations affected by the terrorist attacks.

20.1.3.2.7.2.1 (07-23-2020)

Federally Declared Disaster Area

1. If the Secretary of the Treasury determines that a taxpayer was affected by a federally declared disaster area, IRC 7508A(d) provides for a mandatory and automatic 60 day period that shall be disregarded both in determining whether a required action was performed in a timely manner and in determining the amount of penalty or interest to be charged. In addition to the automatic 60 day period, IRC 7508A(a) provides that the Secretary may specify a period of up to one year that may be disregarded.

2. When the Secretary determines that taxpayers are affected by a federally declared disaster, the IRS publishes public guidance and/or news releases specifying both the taxpayers determined to be affected and the length of the period to be disregarded. The information can be found on the IRS website using search key "disaster tax relief." IRS employees can research this information on-line at http://www.icce.irs.gov/fema/, and at http://serp.enterprise.irs.gov/databases/irm-sup.dr/disaster/disaster.html.

3. IRS computer systems automatically identify taxpayers located in the covered disaster area and apply automatic filing and payment relief.

4. The following taxpayers also qualify for penalty relief due to federally declared disaster areas and may call the IRS disaster hotline at 1-866-562-5227 to request that relief:

   1. Taxpayers whose books, records, or responsible tax professional are located within a disaster area, while the taxpayer's business (or principal residence in the case of individuals) is not.

   2. Relief workers affiliated with a recognized government or charitable organization assisting in the relief activities in a covered disaster area.

   3. Any individual visiting the covered disaster area who was killed or injured as a result of the disaster.

   4. Any other person determined by the IRS to be affected by the disaster.

5. If a taxpayer claims that a penalty should not have been charged due to the disaster, follow the instructions below.

   If	And	Then
   TC 971 with Action Code 086, 087 or 688 is posted in the entity	The transaction date of the TC 971 is prior to the return due date, and the secondary date of the TC 971 is after the due date of the first installment,	Explain that the disaster area was taken into consideration when we computed the penalty. Provide a copy of our computation.
   TC 971 with Action Code 086, 087 or 688 is not posted in the entity or none of the period between the due date of the first installment and the return due date falls within the period between the TC 971 transaction date and the secondary date	The ZIP code of the location where the taxpayer maintains its records and books (i.e., the responsible tax professional's address) is not specifically included in the IRS bulletin,	Explain that the taxpayer's address, or the area where the taxpayer's books and records were kept is not within the area identified by the Secretary (or his designee) as affected by the disaster, and that the penalty is correct.
   TC 971 with Action Code 086, 087 or 688 is not posted in the entity, but part or all of the period between the first installment due date and the return due date falls within the published disaster period	The taxpayer qualifies for relief under IRM 20.1.3.2.7.2.1 (4).	Follow the instructions for your functional IRM for input of TC 971 with Action Code 688 in the taxpayer's entity. If you are unable to locate the instructions, contact the disaster staff for assistance. Contact information is available on the MySB/SE web site.

   Note:

    

   When applicable, the disaster period is excluded in the computation by setting the penalty rate between the disaster start date and end date equal to zero.

6. For major disasters declared after November 15, 2021, for which individual assistance is being provided under section 408 of the Stafford Act, IRC 7508A(d) provides for a mandatory and automatic 60 day period that the IRS must disregard in determining whether "qualified taxpayers" performed certain required acts in a timely manner. The 60 day postponement applies to the filing and payment of any income, estate, gift, employment or excise tax. For a full list of acts to which the automatic postponement applies, see IRC 7508(a)(1)(A)-(F) .

7. In addition to the automatic 60 day period, the Secretary may, under IRC 7508A(a), specify a period of up to one year that may be disregarded in determining the timely performance of:

   1. Certain acts to be performed by the taxpayer, such as filing tax returns and paying tax liabilities (see IRC 7508(a)(1) );

   2. The amount of any interest, penalty, and additional amount or addition to the tax for periods after such date; and

   3. The amount of any credit or refund.

[abctax55]

Bob - do you really expect folks to read all that 😉

[IRonMaN]

Maybe Intuit can add that to its program alerts so that people won't read it there too. 😁

[BobKamman]

@abctax55  I don't expect IRS employees to read it, but a few of us might be interested in what they are missing.  

[IRonMaN]

I think she was referring to the general population that inhabits this place.

[abctax55]

Yep... "folks" meaning the ones that post here without reading the previous post(s) addressing their issue/question.