This article has been saved to your Favorites!

IRS Waives Estimated Tax Penalties For Suspended Loss Limit

By Theresa Schliep · January 19, 2021, 6:20 PM EST

Individuals will not owe tax underpayment penalties resulting from a coronavirus relief bill's suspension of rules that ordinarily limit the use of excess business losses, the Internal Revenue Service said in guidance on Tuesday.

The IRS waived penalties under Internal Revenue Code Section 6654 for the owners of pass-through businesses who may have underpaid estimated income tax installments that were due by July 15, 2020, because of the temporary suspension of the rules, the IRS said in a notice.

The guidance laid out requirements for qualifying for the waiver, including that the individual seeking the relief timely filed federal income tax returns for 2018 and 2019 and had made a request using procedures laid out in the notice.

The Coronavirus Aid, Relief and Economic Security Act of 2020 temporarily suspended IRC Section 461(l) , which ordinarily limits how much partnerships, S corporations and pass-throughs can claim in losses against nonbusiness income in a given year. The coronavirus rescue package temporarily suspended the provision in an attempt to help businesses access cash amid the economic fallout of the novel coronavirus pandemic.

--Additional reporting by Alex M. Parker. Editing by Vincent Sherry. 

For a reprint of this article, please contact