H.R. 990: Simplify Automatic Filing Extensions Act

The bill known as the Simplify Automatic Filing Extensions Act (SAFE Act) proposes changes to the Internal Revenue Code that would allow individuals to avoid penalties related to income tax payments. Specifically, if a taxpayer pays 125 percent of their income tax liability from the previous year by the due date of their current year's taxes, they will not face a penalty for failing to pay their current year's taxes on time.

Key Provisions

• The bill amends Section 6651(c) of the Internal Revenue Code.
• To qualify for the penalty exemption, individuals must pay an amount equal to 125 percent of the tax owed for the prior year.
• This payment must be made on or before the due date for the current year's tax payment, with consideration given to any extensions for payment.
• The exemptions will not apply if the taxpayer fails to file their income tax return by the due date, did not file a return for the prior year, or if the prior year was less than 12 months long.
• For individuals filing a joint return, specific rules apply to ensure that the tax amounts from both spouses are considered correctly if they did not file jointly in the previous year.
• The provisions of this bill will affect taxable years beginning after December 31, 2024, meaning the changes would take effect for the tax year 2025 and beyond.

Implications

This legislation is designed to simplify the tax payment process for individuals by providing a clear alternative to avoid penalties. By allowing a payment based on the previous year's tax liability, it may help individuals manage their tax payments more effectively and prevent penalties for late payments under certain conditions.

Relevant Companies

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