Many Workers Qualify for Penalty Relief


Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

Estimated Tax Penalty Waiver

If you wind up owing tax because too little was taken out of your paychecks during 2009, you may qualify for special relief on a penalty that sometimes applies.

If you owe tax when you file your 2009 return, the IRS will waive any estimated tax penalty that applies, if it relates to various changes made to the withholding tables during 2009. These changes, reflecting the new Making Work Pay Credit, boosted take-home pay for millions of workers during the year. The vast majority of workers had enough taken out of their paychecks during 2009 and can still expect a refund when they file.

However, because everyone’s tax situation is different, some people may have to make an unexpected tax payment when they file their return and with that payment may come an estimated tax penalty, depending upon the circumstances. If you receive an estimated tax penalty notice from the IRS, you can request a waiver using Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts.

The Making Work Pay Credit remains in effect during 2010. So you can also make sure that you don’t come up short again this year by filling out a new Form W-4, Withholding Allowance Certificate, and giving it to your employer. The IRS Withholding Calculator can help you figure out how much more tax to have taken out.

When you file your return, don’t forget to claim the Making Work Pay Credit on Schedule M, and look into all the other new and expanded recovery-related credits and deductions that may apply to you. Visit the ARRA page on this Web site for details.