SECTION 3. BACKGROUND

.01 Underpayment of estimated income tax by individual .

(1) Estimated income tax and liability for addition to tax . Generally, the Code requires taxpayers to pay Federal income taxes as they earn income. To the extent these taxes are not withheld from wages or other income, a taxpayer normally must pay estimated income tax on a quarterly basis. Individual taxpayers who fail to make a sufficient or timely payment of estimated income tax are liable for an addition to tax under § 6654(a).

(2) Quarterly payments of estimated income tax . Section 6654 provides that, in the case of an individual, estimated income tax is generally required to be paid in four installments, each in the amount of 25 percent of the required annual payment. Generally, under § 6654(d)(1)(B), the required annual payment is the lesser of (i) 90 percent of the tax shown on the return for the taxable year; or (ii) 100 percent of the tax shown on the return of the individual for the preceding taxable year (110 percent if the individual’s adjusted gross income on the previous year’s return exceeded $150,000), provided that the preceding taxable year was 12 months in duration and the individual filed a return for that preceding taxable year. An individual taxpayer whose income varies during the taxable year may be able to use the annualized income installment method described in § 6654(d)(2) to reduce the installment amount for installments for the taxable year that are due earlier, consequently increasing the installment amount for installments for the taxable year that are due later.

(3) Required annual payment based on original return . The required annual payment is based on the tax shown on the original income tax return (original return) for the taxable year, rather than the tax

shown on any amended income tax return (amended return). In § 6654(d)(1)(B), the term “return for the taxable year” refers to the original return for the taxable year and does not refer to an amended return filed after the filing due date of the return for the taxable year. See, e.g., Mendes v. Commissioner, 121 T.C. 308, 324 (2003) (“We have repeatedly held that a taxpayer’s estimated tax liability is based upon the taxpayer’s tax liability as stated on the original tax return as filed . . . .”). Thus, for example, for the 2019 taxable year, the return for the taxable year of a calendar-year taxpayer is the return filed by July 15, 2020, or by October 15, 2020, if the taxpayer received an extension of time to file under § 6081 of the Code. Similarly, § 1.6654-2(b)(3) of the Income Tax Regulations provides that, with respect to an individual, the term “return for the preceding taxable year” means the individual’s income tax return for that preceding taxable year required by § 6012(a)(1) of the Code and the individual’s self-employment tax return for that preceding year which is required by § 6017 of the Code (that is, the original return of the individual for that preceding taxable year) and does not refer to an amended return filed after the filing due date of that return. For purposes of § 6654, an amended return filed before the filing due date is considered the original return, but an amended return filed after the filing due date is not considered the original return. However, a joint return filed after the filing due date that replaces previously filed separate returns is considered the original return. See § 6013(b)(1); Rev. Rul. 80-355, 1980-2 C.B. 374 (Dec. 22, 1980).

(4) Due dates for installments of esti- mated income tax . Estimated income tax installments of an individual having a calendar-year taxable year generally are due on April 15, June 15, and September 15 of the taxable year, and on January 15 of the following year. See § 6654(c)(2). For an individual with a fiscal-year taxable year, the due dates of installments of estimated income tax are determined by substituting corresponding months. See § 6654(k)(1). Certain taxpayers are subject to specialized installment amounts and due dates. See §§ 6654(h), (i), and (j).

(5) Exceptions to the addition to tax . An individual taxpayer will not be subject

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2017, and before January 1, 2021. See § 172(b)(1)(D)(i). Under § 172(b)(3), taxpayers, including corporate and individual taxpayers, may elect to forgo the new fiveyear carryback of such NOLs. The Treasury Department and the IRS understand that, in the absence of an election under § 172(b)(3), corporate and individual taxpayers may have underpaid one or more installments of estimated income tax for the taxable year that began in 2019 due to consequences similar to those described in section 3.02(3)(a) of this notice.

(b) No exception to addition to tax based on equity and good conscience con- siderations . The Treasury Department and the IRS have determined that the effect on estimated income tax requirements of the CARES Act amendment to § 461(l)(1) (B) is distinguishable from the effect of the CARES Act amendment to § 172(b). Specifically, the Treasury Department and the IRS note that an individual taxpayer cannot make an election to opt out of the effect of the CARES Act amendment to § 461(l)(1)(B). In contrast, taxpayers may elect under § 172(b)(3) to forgo the new five-year carryback for NOLs. As a result, the Treasury Department and the IRS have determined that it would not be against equity and good conscience to impose an addition to tax under § 6654 for underpayments of estimated income tax resulting from changes made by the CARES Act to § 172(b), and thus have decided not to provide relief with respect to the new NOL carryback that taxpayers may elect to forgo.