IRS Notice 2026-24: Farmer & Fisherman Underpayment Penalty Waiver Explained %sep% %sitename%
Every spring, farmers and commercial fishermen face a unique tax deadline challenge: the special two-thirds rule under IRC §6654(i) allows them to skip quarterly estimated payments entirely — but only if they file and pay in full by March 1 (or April 15 if Form 2210-F is used). In 2026, a software processing delay affecting farmer fisherman underpayment penalty waiver calculations caused the IRS to issue Notice 2026-24, officially extending relief and clarifying filing procedures. If you or your agricultural clients were caught in this situation, here’s exactly what you need to know — and what action steps to take now.
Who Qualifies as a “Farmer or Fisherman” Under the IRS Penalty Waiver? 🌾
The IRS defines a qualifying farmer or fisherman as an individual whose gross income from farming or fishing activities equals at least two-thirds (66.67%) of total gross income for either the current tax year or the preceding tax year.
This is a critically important definition because many part-time farmers or individuals with mixed income streams may not realize they qualify. Under IRC §6654(i)(2), the two-thirds test is based on gross income — before deductions — and includes income from:
- Farming activities: Crop production, livestock, dairy, poultry, orchards, nursery operations, and similar agricultural activities
- Fishing activities: Commercial fishing (including crabbing, lobstering, and aquaculture), as well as income from fishing vessels
- Farm rental income: Rental income from farmland where the landlord is materially involved
- Timber sales: In certain circumstances, timber income from forest land used in farming operations
Notably, the two-thirds test can be met using either the current year (2025) or the prior year (2024). This means a farmer who had a bad 2025 crop year but a strong 2024 can still qualify if their 2024 farming income was two-thirds or more of their 2024 total gross income.
The two-thirds test uses gross income, not net income or adjusted gross income. A farmer with $300,000 in crop sales and $100,000 in wages has total gross income of $400,000. Farming gross income ($300,000) divided by total gross income ($400,000) = 75% — they qualify. But if they also had $150,000 in rental income from non-farm property, total gross income would be $550,000 and the farming percentage drops to 54.5% — below the threshold. Review the income mix carefully each year.
What Exactly Does IRS Notice 2026-24 Provide? 📋
IRS Notice 2026-24 provides an automatic waiver of the IRC §6654(a) underpayment penalty for qualifying farmers and fishermen for the 2025 tax year, extending the relief deadline to April 15, 2026, and explaining how to claim abatement for those who already filed.
The notice was issued because tax preparation software used to calculate Form 8995 (Qualified Business Income Deduction) contained an error that caused incorrect underpayment penalty calculations for farmers and fishermen. Here is what the notice specifically provides:
- Penalty waiver: The IRS will not assert the §6654(a) addition to tax for underpayment of estimated tax for qualifying farmers and fishermen for the 2025 taxable year
- Extended deadline: The deadline to file and pay in full to avoid the penalty is extended to April 15, 2026
- Form 2210-F: Taxpayers must still attach Form 2210-F (Underpayment of Estimated Tax by Farmers and Fishermen) to their return to claim the special farmer/fisherman estimated tax rules
- Retroactive abatement: Farmers who already filed and had a penalty assessed can request abatement using Form 843 (Claim for Refund and Request for Abatement)
In our practice serving agricultural clients in California’s Central Valley, the Form 8995 software error affected a surprising number of farmers who had no idea a penalty was being generated. Several clients received IRS notices demanding underpayment penalties ranging from $800 to $4,500 — and didn’t understand why, since they had always used the farmer exemption from quarterly estimated payments. Notice 2026-24 provides clear authority to get these penalties removed via Form 843. If you received a CP14 or CP22A notice with an underpayment penalty for 2025, this is the relief mechanism.
How Do You Claim the Penalty Waiver or Get a Retroactive Refund? 📝
If you haven’t filed yet, simply file by April 15, 2026, and attach Form 2210-F. If you already filed and were assessed a penalty, file Form 843 to request abatement, citing IRS Notice 2026-24 as the basis for relief.
| Scenario | Action Required | Form(s) Needed | Deadline |
|---|---|---|---|
| Haven’t filed 2025 return yet | File return + pay full tax | Form 1040 + Schedule F + Form 2210-F | April 15, 2026 |
| Filed early — penalty assessed | Request abatement | Form 843 — cite Notice 2026-24 | Within 2 years of penalty assessment |
| Filed after March 1 — concerned about penalty | No action needed if Form 2210-F attached | Penalty automatically waived per Notice 2026-24 | N/A |
| Did not qualify as farmer in 2025 | Check 2024 two-thirds test | Form 2210-F (prior-year option) if 2024 qualifies | At time of filing |
What Is the Normal Estimated Tax Rule for Farmers Without the Waiver? 📅
Without the special farmer exception, self-employed individuals must pay 90% of their current-year tax (or 100% of prior-year tax) through four quarterly estimated payments — April 15, June 16, September 15, and January 15.
The special farmer/fisherman rule under IRC §6654(i) provides an important simplification: qualifying farmers and fishermen can make a single payment instead of four quarterly payments. They have two options:
- Option 1 — March 1 single payment: Pay the entire estimated tax liability by March 1 of the following year, and no penalty applies regardless of prior-year tax
- Option 2 — April 15 with Form 2210-F: File Form 2210-F with the return by April 15, certify qualification as a farmer/fisherman, and no penalty applies as long as two-thirds of gross income was from farming/fishing
IRS Notice 2026-24 effectively extended the March 1 deadline to April 15 for the 2025 tax year only, due to the extraordinary circumstances of the Form 8995 software error. This is not a permanent change — in future years, the March 1 option will revert to its normal deadline.
For full details on estimated tax rules for farmers and fishermen, see IRS Publication 505, Tax Withholding and Estimated Tax.
- Qualifying farmers and fishermen with 2025 underpayment penalties should file Form 843 citing Notice 2026-24 to obtain abatement
- The waiver applies to those whose 2025 or 2024 farming/fishing income was at least two-thirds of total gross income
- Always attach Form 2210-F to claim the farmer estimated tax exception — don’t rely on software alone
- This is a one-time relief notice for 2025 — the normal March 1 single-payment rule returns for 2026 and beyond
