IRS Provides Estimated Tax Penalty Relief to Qualifying Farmers and Fishermen

(Parker Tax Publishing April 2026)

The IRS provided a waiver of the addition to tax under Code Sec. 6654 for underpayment of estimated income tax by farmers and fishermen who have only one required installment payment (instead of four quarterly payments) due on January 15 (i.e., qualifying farmers and fisherman). Under the notice, the addition to tax is waived for qualifying farmers and fishermen who, by April 15, 2026, file a calendar-year 2025 federal income tax return and pay in full any tax reported as due on the return. Notice 2026-24.

Background

Generally, taxpayers are required to pay federal income taxes as they earn income. To the extent these taxes are not withheld from wages or other sources, a taxpayer must pay estimated income tax on a quarterly basis. Code Sec. 6654 provides that, in the case of an individual taxpayer, estimated income tax is required to be paid in four installments, each of which is 25 percent of the required annual payment.

An individual taxpayer who fails to make a sufficient and timely payment of estimated income tax generally is liable for an addition to tax under Code Sec. 6654(a). However, special rules may apply in the case of an individual taxpayer who is a farmer or fisherman and satisfies the requirements of Code Sec. 6654(i) for a tax year (i.e., a qualifying farmer or fisherman). Under Code Sec. 6654(i)(1), a qualifying farmer or fisherman has only one required installment payment (instead of four quarterly payments) due on January 15 of the year following the tax year if at least two-thirds of the taxpayer's total gross income was from farming or fishing in either the tax year or the preceding tax year. For a qualifying farmer or fisherman who does not make the required estimated tax installment payment by January 15 of the year following the tax year, Code Sec. 6654(i)(1)(D) provides that the taxpayer is not subject to an addition to tax for failing to pay estimated income tax if the taxpayer files the return for the tax year and pays the full amount of tax reported on the return by March 1 of the year following the tax year.

Under Code Sec. 6654(e)(3)(A), the 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.

According to the IRS, for the calendar-year 2025 tax year, some qualifying farmers and fishermen may have had difficulty preparing and electronically filing complete federal income tax returns that include Form 8995, Qualified Business Income Deduction Simplified Computation. The IRS corrected the 2025 Instructions for Form 8995 on January 27, 2026, including the line 11 computation of taxable income before the qualified business income deduction, and some taxpayers and preparers reported that they could not complete returns until February 23, 2026, when updated software became available.

Form 8995 may be required to be included in affected taxpayers' federal income tax returns for the calendar-year 2025 tax year (calendar-year 2025 tax returns) by March 2, 2026 (the first day after March 1 that is not a Saturday, Sunday, or legal holiday), the deadline that applies under Code Secs. 6654(i)(1)(D) and 7503. Accordingly, the IRS determined it is appropriate to waive certain penalties for qualifying farmers and fishermen due to these unusual circumstances if the requirements set forth in Notice 2026-24 are satisfied.

Notice 2026-24

The addition to tax under Code Sec. 6654 for failure to make an estimated tax payment for the 2025 tax year is waived for any qualifying farmer or fisherman who files a calendar-year 2025 tax return and pays in full any tax due on the return by April 15, 2026. The waiver will apply to any taxpayer who is a qualifying farmer or fisherman for the 2025 tax year and fulfills the conditions stated in the previous sentence.

The waiver will apply automatically to any taxpayer who qualifies for the waiver and does not report an addition to tax under Code Sec. 6654 on the calendar-year 2025 tax return. Taxpayers who otherwise satisfy the criteria for relief under Notice 2026-24, but already filed a return and reported an addition to tax under Code Sec. 6654, may request an abatement of the addition to tax by filing Form 843, Claim for Refund and Request for Abatement, in accordance with the Instructions for Form 843 and as follows:

Write "Request for Relief under Notice 2026-24" at the top of Form 843.

Check the top-of-form box for 'Penalty -- Abatement or refund of a penalty or addition to tax due to reasonable cause or other reason allowed under the law'.

On line 3, show the dates of any payment of tax liability and addition to tax under Code Sec. 6654 for the tax period involved.

On line 4, check the box for 'Income'.

Enter "6654" on line 6.

Check box c on line 7.

On line 8, state why the taxpayer's circumstances satisfy the criteria for relief under Notice 2026-24. Generally, this would include the status of the taxpayer as a qualifying farmer or fisherman, filing a calendar-year 2025 tax return, and paying in full any tax due on the return by April 15, 2026.

A taxpayer eligible for relief under Notice 2026-24 is not required to attach Form 2210F, Underpayment of Estimated Tax by Farmers and Fishermen, solely to claim the waiver provided by Notice 2026-24.

For a discussion of the rules for estimated tax payments by qualifying farmers and fishermen, see Parker Tax ¶251,105.

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