IRS grants estimated tax penalty relief for farmers and fishermen and updates 2026 foreign housing limits
IRS Internal Revenue Bulletin, 2026-17 I.R.B.
The IRS has given qualifying farmers and fishermen until April 15, 2026, to file their 2025 returns and pay in full without the usual §6654 estimated tax penalty. The agency also updated the §911 foreign housing cost caps for 2026 and published the annual table of higher-cost locations.
Overview of the Guidance
Internal Revenue Bulletin 2026-17 includes two important notices.
Notice 2026-24 provides relief from the §6654 tax penalty for certain farmers and fishermen who missed the usual March 2, 2026 deadline under their special estimated tax rule. They qualify if they file their 2025 return and pay the full tax by April 15, 2026.
Notice 2026-25 updates the §911 housing expense limits for 2026 for certain foreign locations. Taxpayers can also use the 2026 higher limits for 2025 if the new amount is higher than the 2025 limit for their location. The IRS issues these updates annually to reflect changes in global housing costs.
Holding
The IRS waived the §6654 estimated tax penalty for qualifying farmers and fishermen who file their 2025 returns and pay in full by April 15, 2026. It also released the 2026 location-specific §911 housing cost limits, which apply to tax years starting January 1, 2026, and can be used for 2025 if the 2026 cap is higher.
Why It Matters
The relief for farmers and fishermen is especially useful. It addresses a filing problem caused by issues with Form 8995 instructions and software, rather than a change in the law. Practitioners with affected clients now have a short administrative extension without needing to argue reasonable cause for each case.
This relief is limited. It only applies to qualifying farmers and fishermen under the special §6654(i) rule, only for the 2025 tax year, and only if the return is filed and paid in full by April 15, 2026. Missing that deadline means the relief does not apply.
The housing notice is a routine annual update, but it remains important for expatriate tax returns. The location tables directly impact the allowable foreign housing exclusion or deduction under §911.
The option to use the 2026 higher housing limits for 2025 is important for amended returns and returns still being prepared. Taxpayers in higher-cost locations may receive a larger benefit than they would have under Notice 2025-16.
This bulletin does not introduce a new policy direction. One notice provides temporary administrative relief, while the other is an annual update for inflation and geographic differences. These updates are useful, but not groundbreaking.
Key Facts
Notice 2026-24:
§6654 usually requires estimated tax payments during the year.
Qualifying farmers and fishermen get special treatment if at least two-thirds of their total gross income came from farming or fishing in either the current or prior year.
Under that special rule, they generally have one required installment due January 15 of the following year.
If they do not make that installment, they usually avoid the addition to tax by filing the return and paying in full by March 1, which is adjusted here to March 2, 2026, because March 1 fell on a non-business day.
Treasury and IRS said some affected taxpayers had trouble completing returns that included Form 8995 because the 2025 instructions were corrected on January 27, 2026, and updated software was not available until February 23, 2026.
IRS responded by waiving the §6654 addition for qualifying farmers and fishermen who file 2025 returns and pay in full by April 15, 2026.
Notice 2026-25:
§911 allows a qualified individual to exclude foreign earned income and to exclude or deduct a housing cost amount.
For 2026, the maximum foreign earned income exclusion amount is $132,900.
The base housing amount for a full year is $21,264, which is 16 percent of that amount.
The general housing expense cap for a full year is $39,870, which is 30 percent of that amount.
IRS published higher location-specific limits for many foreign cities and regions.
Statutory or Regulatory Framework
§6654 imposes an addition to tax for underpayment of estimated income tax.
§6654(i) gives qualifying farmers and fishermen a special one-installment rule instead of four quarterly installments.
§6654(e)(3)(A) lets Treasury waive the addition in unusual circumstances when imposing it would be against equity and good conscience.
§911 allows a qualified individual to exclude foreign earned income and claim a housing exclusion or deduction.
The “housing cost amount” is generally housing expenses minus a base housing amount.
§911(c)(2)(B) lets Treasury adjust the housing expense limitation for geographic differences in housing costs.
Scope of Relief
For Notice 2026-24, the relief covers any taxpayer who:
is a qualifying farmer or fisherman for 2025
files a calendar-year 2025 federal income tax return,
pays in full any tax due on that return by April 15, 2026
The waiver applies automatically if the taxpayer qualifies and does not report a §6654 addition on the return. Taxpayers who already filed and paid the addition can request an abatement on Form 843. IRS instructs them to write “Request for Relief under Notice 2026-24” at the top, check the penalty abatement box, enter code section 6654, and explain why they qualify. IRS also says eligible taxpayers do not need to attach Form 2210-F solely to claim this waiver.
For Notice 2026-25, the relief is not really “relief” so much as the annual calibration exercise. IRS replaces the general $39,870 full-year housing cap with higher location-specific caps where warranted. The notice also explicitly allows taxpayers to use the 2026 higher cap for 2025 when the 2026 amount exceeds the 2025 amount in Notice 2025-16. It supersedes Notice 2025-16.
Key 2026 Housing Figures
The notice’s table runs across pages 4 through 7 and lists full-year and daily limits by location. A few notable examples:
Hong Kong: $114,300 full year, $313.15 daily
Geneva: $116,900 full year, $320.27 daily
Moscow: $108,000 full year, $295.89 daily
Singapore: $86,700 full year, $237.53 daily
Bermuda: $90,000 full year, $246.58 daily
Dubai: $57,174 full year, $156.64 daily
Abu Dhabi: $49,687 full year, $136.13 daily
Riyadh: $40,000 full year, $109.59 daily
London: $68,600 full year, $187.95 daily
Paris area listed as Garches, Paris, Sevres, Suresnes, and Versailles: $73,600 full year, $201.64 daily
These figures are important because the housing exclusion calculation depends on location. The same taxpayer with the same income can get different results depending on the city. Tax law often turns geography into numbers.
Arguments or Agency Rationale
IRS rationale for Notice 2026-24:
Some qualifying farmers and fishermen needed Form 8995 for 2025 returns.
The 2025 Form 8995 instructions were corrected late.
Updated software was not available until February 23, 2026.
Because the normal March 2, 2026, filing-and-payment deadline came too soon after the fix, Treasury and IRS treated the situation as unusual circumstances, justifying the exercise of waiver authority under §6654(e)(3)(A).
IRS rationale for Notice 2026-25:
§911 ties the housing exclusion and deduction to limits that can be adjusted for geographic differences.
Treasury and IRS annually publish those location-specific limits based on relative housing costs outside the United States.
Practical Implications for Practitioners
For farmers and fishermen:
Review 2025 returns that include Form 8995 and were affected by the software delay.
Confirm whether the client meets the two-thirds gross income test for 2025 or 2024.
If the client filed by April 15, 2026, and paid in full, the §6654 addition should be waived.
If the client has already paid the addition, consider promptly applying Form 843 for abatement.
For international individual returns:
Update §911 workpapers using the 2026 table.
Check whether a client’s 2025 location has a higher 2026 cap than the amount listed in Notice 2025-16.
Consider amended returns or updated 2025 calculations where the higher 2026 amount increases the exclusion or deduction.
IRS issued a narrow administrative waiver for certain 2025 §6654 penalties and published the annual 2026 §911 foreign housing limitation table, with optional use of higher 2026 limits for 2025.
The notice for farmers and fishermen is important because it resolves a real filing issue with a straightforward administrative solution. The housing notice is also significant for current return calculations, but it is a routine annual update rather than a policy shift.