Skip to main content

Tax Administration: Ways to Simplify the Estimated Tax Penalty Calculation

GGD-98-96 Published: May 27, 1998. Publicly Released: May 27, 1998.
Jump To:
Skip to Highlights

Highlights

Pursuant to a legislative requirement, GAO reviewed the: (1) Internal Revenue Code and the Internal Revenue Service (IRS) administrative requirements that cause some of the complexity associated with estimated tax (ES) penalty calculations; and (2) likely effects of corresponding changes to the requirements that would make it easier for taxpayers to calculate their ES penalties.

Recommendations

Matter for Congressional Consideration

Matter Status Comments
To further simplify the ES penalty process for taxpayers, Congress should amend section 6621(b)(2)(B) of the Internal Revenue Code to include the periods June 15 through June 30, September 15 through September 30, and January 1 through January 15.
Closed – Not Implemented
The 106th Congress did not act on this recommendation and it is unlikely that such a change would be made unless Congress enacts a tax simplification bill.

Recommendations for Executive Action

Agency Affected Recommendation Status
Internal Revenue Service To simplify the ES penalty process for taxpayers, the Commissioner of Internal Revenue should revise the form 2210 underpayment schedule to allow taxpayers to track the accumulated underpayment amount rather than individual underpayment amounts.
Closed – Implemented
IRS stated that it would not consider revising the Form 2210 underpayment schedule before legislative action is taken to amend section 6621(2)(B) and expand the ES special rule to the new periods. IRS believes that expanding the special rule would provide the greatest relief to taxpayers and that revising the Form 2210 without incorporating that change would not be justified by the lesser benefits derived from revising the underpayment schedule. There is no movement in the 106 Congress to make this change as part of any tax simplification bill.
Internal Revenue Service To simplify the ES penalty process for taxpayers, the Commissioner of Internal Revenue should revise the form 2210 ES penalty calculation schedule to allow taxpayers to use a 365-day year in all ES penalty calculations.
Closed – Not Implemented
As of July 2008, IRS's position continues to be that it would not consider revising the Form 2210 underpayment schedule before legislative action is taken to amend section 6621(2)(B) and expand the estimated tax (ES) special rule to the new periods. IRS believes that expanding the special rule would provide the greatest relief to taxpayers and that revising the Form 2210 without incorporating that change would not be justified by the lesser benefits derived from revising the underpayment schedule. This remains the situation in April 2009. In June 2009, SI management agreed that it would be best to close this recommendation rather than continue to keep it open.

Full Report

Office of Public Affairs

Topics

Fines (penalties)Income taxesInterest ratesReporting requirementsTax administrationTaxpayersUnderpaymentsEstimated taxesTax returnsTax preparer