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HR990119th CongressWALLET

SAFE Act

Sponsored By: Representative Chu, Judy [D-CA-28]

Introduced

Summary

Avoid the late-payment penalty by prepaying 125% of your prior-year tax. The bill would add a safe harbor to the tax code that exempts individuals from the usual late-payment penalty if they timely pay 125 percent of the prior year's tax by the current year's payment due date.

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  • Individuals and families who pay 125% of last year’s tax by the payment due date would be shielded from the Section 6651(a)(2) late-payment penalty, provided they file the current-year return on time.
  • Couples and joint filers get special rules. A prior-year joint return can be used to meet the 125% test and a spouse’s prior filing status affects how the amount is calculated.
  • Taxpayers who did not file a return for the immediately preceding year or whose prior taxable year was under 12 months would not qualify for the safe harbor.
  • The safe harbor is only available when any additional payments are made with a timely filed return and is assessed as of the earlier of the return due date or the date the return is filed.
  • Would apply to taxable years beginning after December 31, 2024.

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Bill Overview

Analyzed Economic Effects

1 provisions identified: 1 benefits, 0 costs, 0 mixed.

Avoid late-payment penalty by prepaying

If enacted, you would be able to avoid the IRS failure-to-pay penalty for a tax year by paying 125% of the tax shown on your prior year's return on or before the payment due date (including any payment extension). The rule would only apply if you file the current-year return by its due date (including extensions), you filed a return for the prior year, and the prior year was at least 12 months long. Special rules would use prior-year joint return amounts in some cases when spouses change filing status. This would apply to taxable years beginning after December 31, 2024.

Sponsors & CoSponsors

Sponsor

Chu, Judy [D-CA-28]

CA • D

Cosponsors

  • Rep. Carey, Mike [R-OH-15]

    OH • R

    Sponsored 2/5/2025

Roll Call Votes

No roll call votes available for this bill.

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