Interest and Penalties
Estimated tax penalty waived if due to new
law. For estimated tax payments due on or before August 21, 1998,
you will not have to pay a penalty for failure to pay estimated income
tax to the extent the underpayment was created or increased by a provision
of the IRS Restructuring and Reform Act of 1998.
Interest abatement on underpayments in disaster
areas. The IRS will abate interest for all taxpayers who meet both
of the following requirements.
- They were located in an area declared a disaster area by the President
after 1997.
- They were granted extensions to file federal income tax returns
and pay income tax for tax years beginning after 1997.
For more information, see Disaster Area Losses in Publication
547, Casualties, Disasters, and Thefts.
Suspension of interest and certain penalties.
For tax years ending after July 22, 1998, interest and certain penalties
will be suspended if the IRS does not mail you a notice stating your liability
and the basis for the liability within the 18-month period beginning on
the later of:
- The date on which you timely filed the tax return, or
- The due date (without extensions) of the tax return.
For tax years beginning after 2003, the 18-month period will be reduced
to 1 year.
The suspension applies to interest and penalties allocable to the
period beginning the day after the close of the 18-month period and ending
21 days after the IRS mails you a notice stating your liability and the
basis for the liability. Also, this suspension period applies separately
to each notice received by you.
The suspension does not apply to any of the following.
- A failure-to-pay penalty.
- Any penalty, interest, addition to tax, or additional amount with
respect to any tax liability shown on the return.
- A fraudulent tax return.
- A criminal penalty.
Under prior law, interest and penalties accrued on unpaid tax whether
or not you realized that tax was due.
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