Estimated Tax Penalty Relief Applies to All Qualifying Farmers
On March 15, 2022, IRS announced in Notice 2022-12 that it would waive the estimated tax payment penalty for any "qualifying farmer" who files their return and pays their taxes in full by April 18, 2022 (April 19, 2022 for taxpayers in Maine or Massachusetts).
This notice followed a March 3 announcement suggesting that IRS would be granting penalty relief only to qualifying farmers required to file Form 7203. Despite stating that IRS is granting the penalty relief to qualifying farmers because of the difficulty some have had in electronically filing Form 7203, the March 15 notice grants penalty relief to any qualifying farmer who files their 2021 tax return and pays in full any tax due on the return by April 18, 2022 (April 19, 2022 for those who live in Maine or Massachusetts).
Who is a Qualifying Farmer?
A taxpayer is a qualifying farmer or fisherman for the 2021 tax year if at least two-thirds of the taxpayer’s total gross income was from farming or fishing in either 2020 or 2021. See I.R.C. § 6654(i)(2).
What do I need to do?
Notice 2022-13 states that the penalty waiver is automatic for qualifying farmers who have not calculated and paid a penalty. If a qualifying farmer already filed a return and paid the penalty, the Notice provides abatement instructions:
• Write “Request for Relief under Notice 2022-13” at the top of Form 843.
• Enter “6654” on line 4.
• Check the third box on line 5a.
• On line 5b, show the dates of any payment of tax liability and addition to tax
under section 6654 for the tax period involved.
• On line 7, state why the taxpayer’s circumstances satisfy the criteria for relief
under this notice. Generally, this would include the status of the taxpayer as
a qualifying farmer or fisherman, filing a 2021 tax return, and paying in full any
Maine or Massachusetts, by April 19, 2022.
March 3 IRS Announcement (Superseded by Notice 2022-13)
On March 3, IRS announced that it would be providing limited penalty relief for qualifiying farmers required to file Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations.
Form 7203 is a new form that S Corporation shareholders must attach to their IRS Form 1040 to provide IRS with a detailed calculation of their stock and debt basis. IRS did not release the form in time for software providers to make it timely available to electronic filers. This presented a problem for qualified farmers who did not pay estimates by January 18, 2022.* These farmers were required to file their returns and pay their income tax liability by March 1 to avoid an underpayment of estimated tax penalty. Those required to file Form 7203 were unable to meet this deadline.
In its March 3 announcement, IRS states that it “is aware of a third-party software issue affecting qualifying farmers and fishermen attempting to electronically file Forms 7203.” It also states that it “has been working closely with software providers to ease the impact on qualifying farmers and fishermen caused by electronic filing challenges in connection with Form 7203.”
Due to these challenges, the Treasury Department and the IRS intend to issue a notice providing penalty relief for qualifying farmers and fishermen filing Forms 7203 if they electronically file their 2021 tax return and pay in full any tax due by April 18, 2022, or by April 19, 2022, for those qualifying farmers and fishermen who live in Maine or Massachusetts.
The notice does not apply to farmers who do not file Form 7203 or to farmers who filed their returns and paid their taxes on March 1.
We will keep you posted when the notice is released.
*The IRS notice states that the estimated payment was due January 15, 2022. This year, however, the due date was January 18, 2022 (January 15 was a Saturday, and January 17 was a holiday).
The Center for Agricultural Law and Taxation does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. The Center's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.