IRS expands relief from underpayment penalty
In Notice 2019–25, the IRS provided further relief from penalties for underpayment of estimated tax with respect to 2018 individual returns. Under Sec. 6654(d)(1)(B), individuals may be liable for a penalty if they have withheld or paid in estimated taxes less than 90% of the tax shown on the return for the tax year or (2) 100% of the tax shown on the taxpayer’s return for the preceding tax year (110% if the individual’s adjusted gross income on the previous year’s return exceeded $150,000). Citing changes by the law known as the Tax Cuts and Jobs Act, P.L. 115–97, and resulting uncertainties in taxpayers’ withholding and estimated tax payments, the IRS in Notice 2019–11 used its penalty waiver authority to reduce the 90% threshold to 85% for withholding and estimated tax payments made on or before Jan. 15, 2019. Then, in Notice 2019–25, the IRS lowered the threshold to 80%.
To claim the expanded waiver, taxpayers must file Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, with their 2018 income tax return. They should check the waiver box in Part II, box A, of the form and include the statement “80% waiver” on the return.
Credit for GM electric cars phasing out
The IRS announced in Notice 2019–22 the credit phaseout schedule for new qualified plug–in electric drive motor vehicles sold by General Motors LLC (GM) after quarterly reports indicated that GM’s cumulative sales of the vehicles reached the 200,000–vehicle limit of Sec. 30D(e) during the calendar quarter ending Dec. 31, 2018. Accordingly, the credit for all new qualified plug–in electric drive motor vehicles sold by GM began to phase out on April 1, 2019. Earlier, in Notice 2018–96, the IRS announced Tesla Inc. had passed the same limit and that the credit applicable to its vehicles would begin to phase out as of Jan. 1, 2019.
Under the phaseout rules, taxpayers purchasing an affected manufacturer’s vehicles during the first two calendar quarters of the phaseout period may claim 50% of the otherwise allowable credit. Taxpayers purchasing the manufacturer’s vehicles during the third and fourth calendar quarters of the phaseout period may claim 25% of the otherwise allowable credit. No credit is available for vehicles purchased after the last day of the fourth calendar quarter of the phaseout period.
IRS extends private letter ruling pilot program
The IRS announced that it is extending indefinitely its pilot program under Rev. Proc. 2017–52 for private letter rulings that address whether corporate stock distributions, such as spinoffs, are tax–free under Sec. 355. The program was originally set to expire on March 21, 2019.
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