IRS Offers Penalty Relief for Corporate Alternative Minimum Tax
In a move that will likely be welcomed by the business community, the Internal Revenue Service (IRS) has announced a penalty waiver for corporations that miss the estimated tax payment deadline for the first quarter’s corporate alternative minimum tax (CAMT). The waiver, detailed in Notice 2022-33, specifically addresses the installment of estimated income tax due on or before April 15, 2024, and extends to companies with a tax year beginning in February until May 15, 2024.
The relief is designed to mitigate penalties under Section 6655 for any underpayment attributed to the CAMT liability for that period. This decision follows a previous notice from the Treasury Department and the IRS last June, which waived CAMT penalties for tax years starting after December 31, 2022, and before January 1, 2024. With that period now lapsed, the new notice will remain in effect until final regulations are established.
The IRS has been working to provide clarity on the CAMT since last year when it announced plans to issue proposed regulations. Interim guidance was also released to help taxpayers understand certain aspects of the CAMT. To comply with the new waiver and avoid receiving a penalty notice, affected corporations must file Form 2220, “Underpayment of Estimated Tax by Corporations,” with their federal income tax return. It’s important to note that this must be done even if no estimated tax penalty is owed.
Instructions for Form 2220 will be updated to include specific directions on how to sidestep a penalty notice. Additionally, these instructions will confirm that no additional tax will be imposed under Section 6655 for failure to make an estimated tax payment of CAMT liability for the specified installments. Corporations can also exclude these amounts when calculating their required annual payment on Form 2220.
This temporary relief is expected to provide breathing room for corporations as they navigate their tax obligations amidst ongoing regulatory updates. The IRS’s decision underscores its recognition of the complexities surrounding the implementation of the CAMT and its commitment to providing taxpayers with the necessary guidance and support.
