You Make the Call - Aug. 27, 2026

Question: In August, John, a sole proprietor who reports his landscaping business income on Schedule C (Form 1040), Profit or Loss From Business, realized he did not make any of his 2026 required quarterly estimated tax payments. As a result, he knows he will face penalties for underpayment of estimated tax. Will the underpayment of estimated tax penalty be automatically abated under the AEP? 

Answer: No. The AEP program applies only to certain penalties, including the failure-to-file penalty under §6651(a)(1), failure-to-pay penalty under §6651(a)(2), failure-to-deposit penalty under §6656, partnership return penalty under §6698(a)(1) and S corporation return penalty under §6699(a)(1). It does not apply to the penalty for an individual’s underpayment of estimated tax under §6654. Therefore, the AEP program will not remove John’s estimated tax penalty. 

John may still avoid or reduce the penalty if he qualifies for one of the separate exceptions or waiver provisions under §6654. These may include having no tax liability for the prior year, meeting an applicable safe harbor based on prior-year or current-year tax, using the annualized income installment method or qualifying for a waiver because of casualty, disaster or other unusual circumstances. John should file Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, with his 2026 tax return to request one of the other exceptions or waivers that may apply.