IRS Provides Estimated Tax Penalty Relief for Farmers
Due to issues with Form 8995, IRS is eliminating the underpayment penalty for farmers, however, this is more than a month late for most.
Farmers can elect to file and pay their tax by March 1 of each year and not have to pay any estimated tax on January 15.
For this tax season, the IRS had finalized the Form 8995 which is applicable to almost all farmers late in January 2026 and many tax preparation software providers had not finalized the calculations for this form as late as February 23, 2026.
Therefore, the IRS has elected with urging from the AICPA to automatically waive the penalties for qualifying farmers as long as they pay in full by April 15, 2026. The IRS just issued Notice 2026-24 with the details.
However, many farmers have already filed their return and perhaps paid the penalty. In that case, they will be required to file Form 843, Claim for Refund and Abatement of Penalty.
The notice provides the steps as needed for this filing 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 section 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 this notice. 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.
This relief is welcome for many farmers, but as usual it is a little late and could have been issued before March 1, but better late than never. We had also heard of issues with Form 4136 to get the credit for farm use of diesel or gasoline being very late this year too.
This continues to be a very good reason to no longer try to file a farmer’s tax return by March 1. In many cases, it is more economical to pay an estimate on January 15 and then pay the remaining tax on April 15. If you do this, there is no penalty and you have an extra 65 or so days to get the return done correctly, especially with 1099s and K-1s being later and later every year.
The bottom line is wean yourself off of this and give it a try next year. You may end up wishing you had done is several years earlier.