Compliance
Navigating the IRS’s New Notice 2026-3 Relief for Estimated Tax Underpayments
IRS Notice 2026-3 provides much-needed relief for taxpayers facing underpayment penalties due to deferrals under Section 1062 of the One, Big, Beautiful Bill. Here’s what the relief entails and how to make sure you benefit.
By NomadicTax Research Team • 5-8 min read • April 10, 2026
## Introduction
The U.S. IRS recently issued **Notice 2026-3**, a relief measure under the *One, Big, Beautiful Bill Act* (OBBBA), addressing penalties for underpayment of estimated income tax. This is highly relevant for taxpayers who sold or exchanged **qualified farmland property** and elected deferment under Section 1062(a). ([irs.gov](https://www.irs.gov/irb/2026-02_IRB?utm_source=openai)) This article breaks down how the relief works and what actions you should take.
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## What Notice 2026-3 Covers
- **Penalty waiver**: The notice provides relief from the additions to tax under Sections 6654 and 6655 (penalties for underpaid estimated tax) for taxpayers who made a Section 1062 election in the case of a qualified sale or exchange of qualified farmland property. ([irs.gov](https://www.irs.gov/irb/2026-02_IRB?utm_source=openai))
- **Scope & criteria**: To qualify, you must have properly made the Section 1062 election, and the underpayment must derive from tax deferred via that election. The relief **depends on the portion of tax deferred**. ([irs.gov](https://www.irs.gov/irb/2026-02_IRB?utm_source=openai))
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## Who Is Likely Affected?
- Farmers or landowners who sold or exchanged farmland and qualified under the law.
- Individuals or entities who elected Section 1062(a) deferral and may otherwise incur underpayment penalties.
- Taxpayers who have already filed returns reporting these penalties and now may **request an abatement**. ([irs.gov](https://www.irs.gov/irb/2026-02_IRB?utm_source=openai))
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## What Actions Taxpayers Should Take
1. **Confirm eligibility**: Ensure your transaction met the criteria of “qualified sale or exchange” and that you properly made the Section 1062 election.
2. **Compute deferred amount**: Identify how much tax was deferred—the waiver applies to the portion associated with that.
3. **Review filed returns**: If you’ve already filed a return and were assessed penalties under Sections 6654 or 6655, file **Form 843 – Claim for Refund and Request for Abatement**, referencing “Abatement requested pursuant to Notice 2026-3”. ([irs.gov](https://www.irs.gov/irb/2026-02_IRB?utm_source=openai))
4. **Estimate going forward**: For future situations, adjust your estimated tax payments, considering the deferred tax to avoid penalties outside relief.
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## Practical Example
Let’s say **Becky**, a landowner, sells farmland on 1 July 2025 and properly elects a Section 1062 election. She defers $100,000 of tax. When making estimated tax payments for 2025, she underpays by $10,000—an amount derived from the deferred portion. Under Notice 2026-3, that $10,000 portion’s penalty under Sections 6654/6655 may be waived. If Becky already filed her return and included the penalty, she can file Form 843 to abate it.
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## Key Things to Watch Out For
- The relief **only applies to underpayments caused by tax deferred under Section 1062**—other underpayments remain subject to penalties.
- Make sure the Section 1062 election was properly made—procedural errors can disqualify relief.
- File timely – if soon, don’t delay in assessing whether you should request abatement.
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## Summary and Takeaway
Notice 2026-3 offers a critical safety net for taxpayers impacted by the farmland property deferral rules under OBBBA. If you qualify, you can avoid costly penalties. Proper documentation and prompt action are key to leveraging this relief.