SECTION 4. LIMITED WAIVER OF

ADDITION TO TAX

.01 Reasons for waiver . The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) are aware that taxpayers may be concerned that, in order to avoid the addition to tax under section 6654 or 6655 for failure to make a sufficient and timely payment of estimated income tax, they must pay the full amount of applicable net tax

January 5, 2026 308 Bulletin No. 2026–2

liability, or a substantial portion of it, as estimated income tax for the taxable year of the qualified sale or exchange. Doing so would be contrary to the purpose of the section 1062 election, which is to allow payment of the liability in installments over four years. Without a limited waiver of the addition to tax, a taxpayer making a section 1062 election might be deprived of the full benefit of the provision.

.02 Limited Waiver . In the interest of sound tax administration, the IRS will waive a portion of the addition to tax under sections 6654 and 6655 attributable to the qualified sale or exchange for which the section 1062 election is made for taxpayers who both qualify to make a section 1062 election and properly make a section 1062 election. The limited waiver applies with respect to the applicable net tax liability the payment of which is deferred by the section 1062 election. Accordingly, a taxpayer may exclude 75 percent of the applicable net tax liability (with respect to the qualified sale or exchange as to which the taxpayer has properly made the section 1062 election) from the calculation of the required annual payment for purposes of determining estimated income tax installment amounts for the taxable year of the qualified sale or exchange for which the section 1062 election is made. In determining the required annual payment for the taxable year of the qualified sale or exchange, the taxpayer must include the portion of the applicable net tax liability that is required to be paid on the due date of the income tax return for the taxable year of the qualified sale or exchange (25 percent of the applicable net tax liability with respect to the qualified sale or exchange as to which the taxpayer has properly made the section 1062 election).

A proper section 1062 election is a prerequisite to receiving the relief provided in this notice, but an acceleration of installment due dates under section 1062(b)(2) will not affect this waiver. The waiver will apply automatically to any taxpayer who qualifies for the waiver and does not self-report an addition to tax under section 6654 or 6655 on their income tax return for the taxable year of the qualified sale or exchange. A taxpayer who otherwise satisfies the criteria for relief under this notice, but who has

already filed an income tax return reporting an addition to tax under section 6654 or 6655, may request an abatement of the addition to tax by filing Form 843, Claim for Refund and Request for Abatement and noting “Abatement requested pursuant to Notice 2026-3” at the top of the claim. A taxpayer that satisfies the criteria for relief under this notice but receives a penalty notice from the IRS should also request an abatement of the addition to tax by filing Form 843.

.03 Form instructions to be modified . The instructions to forms relevant to estimated income tax requirements, including Form 1040-ES, Estimated Tax for Individuals, Form 1041-ES, Estimated Income Tax for Estates and Trusts, Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishermen, Form 2220, Underpayment of Estimated Tax by Cor- porations, will be modified, as necessary, to reflect the relief granted by this notice. If necessary, the modified instructions will be posted on https://www.irs.gov.