IRS to Waive Some Penalties for Non-payment of Estimated Tax
The Department of Treasury and the Internal Revenue Service (IRS) announced in Notice 2023-42 that they will provide penalty relief for corporations failing to pay estimated tax connected to the new corporate alternative minimum tax (CAMT).
The CAMT, established under the Inflation Reduction Act, introduces a 15% minimum tax on the adjusted financial statement income of large corporations, applicable to taxable years beginning after December 31, 2022. Primarily, this provision affects corporations boasting an average annual adjusted financial statement income exceeding $1 billion.
Given the intricacies involved in ascertaining a corporation’s CAMT liability and identifying applicable corporations subject to CAMT, the IRS has decided to mitigate these potential complications. The IRS will waive the penalty for a corporation’s failure to pay estimated income tax related to its CAMT for taxable years beginning after December 31, 2022, and before January 1, 2024.
This temporary relief from the IRS could serve as a lifeline for large corporations during this period of transition. While it may not directly affect small businesses, it underscores the ongoing evolution in the U.S. corporate tax landscape. Small business owners should stay apprised of these developments, as they might hint at future shifts that could impact their own tax obligations.
Despite this grace period, corporations are still encouraged to make appropriate efforts to estimate their tax obligations accurately. Comprehensive and diligent financial management is essential to mitigate potential tax-related issues.
This leniency reflects the IRS’s recognition of the challenges corporations may encounter when navigating the complexities of the new CAMT. It underlines the importance of clear communication and understanding as taxpayers and the IRS alike adjust to these new provisions. By easing the transition into the new tax system, the IRS helps ensure the stability and resilience of the corporate sector.
Corporations should take this opportunity to review their estimated tax calculations and, if necessary, make necessary adjustments to align with the new tax provisions. This proactive approach will enable them to make the most of the grace period while adequately preparing for future tax years.
This article, “IRS to Waive Some Penalties for Non-payment of Estimated Tax” was first published on Small Business Trends