SECTION 2. BACKGROUND

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 sources, a taxpayer must pay estimated income tax on a quarterly basis.

Section 6654 provides that, in the case of an individual taxpayer, estimated income tax is required to be paid in

four installments, each of which is 25 percent of the required annual payment. With some exceptions, section 6654(l) (2) provides that the provisions of section 6654 generally apply to certain trusts and estates.

An individual taxpayer who fails to make a sufficient and timely payment of estimated income tax generally is liable for an addition to tax under section 6654(a). However, special rules may apply in the case of an individual taxpayer who is a farmer or fisherman and satisfies the requirements of section 6654(i) for a taxable year (qualifying farmer or fisherman). Under section 6654(i)(1), a qualifying farmer or fisherman has only one required installment payment instead of four quarterly payments due on January 15 of the year following the taxable year if at least two-thirds of the taxpayer’s total gross income was from farming or fishing in either the taxable year or the preceding taxable year. For a qualifying farmer or fisherman who does not make the required estimated tax installment payment by January 15 of the year following the taxable year, section 6654(i)(1)(D) provides that the taxpayer is not subject to an addition to tax for failing to pay estimated income tax if the taxpayer files the return for the taxable year and pays the full amount of tax reported on the return by March 1 of the year following the taxable year.

The Secretary of the Treasury or her delegate is authorized under section 6654(e)(3)(A) to waive the section 6654 addition to tax for an underpayment of estimated tax in unusual circumstances to the extent its imposition would be against equity and good conscience.

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) understand that, for the 2021 taxable year, some qualifying farmers and fishermen have been unable to electronically file Form 7203, S Corpo- ration Shareholder Stock and Debt Basis Limitations, which may be required to be included in their federal income tax returns for taxable year 2021 (2021 tax returns). Due to this inability, farmers and fishermen may have had difficulty filing their 2021 tax returns electronically by the March 1, 2022, due date provided by section 6654(i)(1). Accordingly, the Treasury Department and the IRS have determined

it is appropriate to waive certain penalties for qualifying farmers and fishermen due to these unusual circumstances if the requirements set forth in section 3 of this notice are satisfied.