The IRS has sent you this notice because you did not make required estimated payments, you have filed a tax return with a refund due to you or the IRS has reduced your refund because you were charged a penalty for failure to have enough taxes withheld or did not make the estimated payments towards your tax liability.
The options you have for responding are:
- Complete Form 2210 for Underpayment of Estimated Tax by Individuals if most withholdings were done in the early part of the year. You can choose to report these withholdings as soon as they are withheld instead of doing it at the end of the year. This may help reduce or get rid of the penalty.
- Complete Form 2210, Schedule AI, Annualized Income Installment Method if you received most of your income in the 3rd and 4th quarter of the year. Annualizing the income may reduce or get rid of the penalty.
- You can request the removal of the penalty if you retired in the past 2 years.
- You can request the removal of the penalty if you underpaid the taxes because of a casualty or disaster or any other unusual circumstance.
- Request the removal of the penalty as advised by an IRS agent.
To avoid another CP30 being sent to you in the future, check the withholdings on your wages, pensions and any other sources of income. If you do not believe the amount being withheld is enough, you can adjust it by filing new withholding certificates.
The ideal amount to have pre-paid in taxes is generally 90% by having enough withholdings from your income or making those estimated payments. To calculate what your tax may be, you can complete Form 2210 for Underpayment of Estimated Tax by Individuals, Estates and Trusts.
For more information regarding your CP30 notice, please visit the IRS website.