When does the IRS waive underpayment penalties?
Executive summary
The IRS will waive or reduce underpayment of estimated tax penalties in limited, specific circumstances—chiefly when the underpayment results from a casualty, federally declared disaster, or other unusual circumstance that makes the penalty inequitable, or when a taxpayer recently retired (after age 62) or became disabled and can show reasonable cause [1] [2]. Taxpayers can also avoid penalties through safe-harbor rules and, in some cases, administrative or first-time abatements, but those relief pathways have distinct eligibility rules [3] [4].
1. What the statute and IRS guidance actually say about waivers
The IRS framework treats the underpayment penalty as a general pay-as-you-go enforcement, and it states plainly that waivers are narrow: the penalty “generally cannot be waived due to reasonable cause,” but will be removed or reduced if the underpayment was the result of a casualty, local disaster, or other unusual circumstance where imposing the penalty would be inequitable [1] [2]. Form 2210 and its instructions enumerate these waiver grounds, require documentation, and direct taxpayers in federally declared disaster areas to rely on automatic relief in many cases rather than filing for the waiver themselves [5] [6].
2. Common factual pathways to relief: disasters, retirement/disability, and reasonable cause
The clearest waiver trigger is a casualty or federally declared disaster that prevented timely payments; taxpayers in covered disaster areas often receive automatic penalty relief while others must submit a signed written explanation and supporting evidence [1] [5]. Another recognized ground is retirement after age 62 or becoming disabled in the tax year or prior year when the underpayment resulted from that change in circumstance and was due to reasonable cause rather than willful neglect [1] [2]. The IRS also allows relief where “other unusual circumstances” make enforcement inequitable—language that is intentionally broad but interpreted in practice only after taxpayers provide documentation and the IRS exercises discretion [5].
3. Administrative and first-time relief: a separate channel
Separate from these specific waivers, the IRS offers administrative penalty relief programs that can eliminate certain penalties if statutory criteria are met—most notably first-time penalty abatement (FTA) for qualifying taxpayers—and some administrative waivers are applied automatically under new guidance beginning in 2026 [4] [7]. FTA and other administrative programs have their own eligibility rules (for example, no penalties in prior years for FTA) and generally do not substitute for the disaster- or disability-based waivers described on Form 2210 [7] [4].
4. How taxpayers request relief and the practical limits
To seek a waiver for an estimated-tax underpayment, taxpayers typically complete Part II of Form 2210 and attach the required documentation to their return, or send a written explanation signed under penalty of perjury to the IRS address on a notice if already assessed; for federally declared disasters, relief may be automatic and the IRS will identify eligible taxpayers by location [5] [1]. The IRS will review submissions and grant relief only when the facts support the narrow standards—practical limits include the need for contemporaneous evidence and the IRS’s discretion in adjudicating “unusual circumstances,” meaning many requests are denied or reduced unless well-documented [5] [1].
5. Alternatives to waiver and what critics note about access
Beyond waivers, taxpayers can avoid or minimize penalties through safe-harbor rules (paying 90% of current year tax or 100% of prior year tax, with higher thresholds for high-income filers), annualized payment methods for uneven income, and payment plans; tax industry guides emphasize these preventive measures because waiver outcomes are discretionary [3] [8] [9]. Critics and tax practitioners warn that IRS discretionary relief can favor taxpayers who know the right forms and documentation or who use paid preparers, and note that administrative waivers like FTA, though expanded, still carry eligibility traps that may leave less-informed filers without relief [7] [4].