(a) In general

Section 6651(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(3) No penalty for failure to pay income tax for individuals who timely pay 125 percent of income tax liability for prior year

(A) In general

Subsection (a)(2) shall not apply with respect to an income tax return of an individual if such individual pays, on or before the date prescribed for the payment of the tax with respect to which such return relates (determined with regard to any extension of time for payment), 125 percent of the amount of tax required to be shown on the income tax return of such individual for the immediately preceding taxable year.

(B) Failure to file; short taxable years

Subparagraph (A) shall not apply—

(i)

if the individual does not file an income tax return for the taxable year described in subparagraph (A) on or before the date prescribed therefor (determined with regard to any extension of time for filing),

(ii)

if the individual did not file an income tax return for the immediately preceding taxable year referred to in subparagraph (A), or

(iii)

if the immediately preceding taxable year referred to in subparagraph (A) was less than 12 months.

(C) Joint returns

In the case of a joint return, if the taxpayer did not file a joint return for the immediately preceding taxable year referred to in subparagraph (A), the amounts required to be shown on the income tax returns of both spouses for such immediately preceding taxable year shall be taken into account under subparagraph (A). Except as otherwise provided by the Secretary, if the individual does not file a joint return for the taxable year to which subparagraph (A) applies and filed a joint return for the immediately preceding taxable year, the entire amount of tax required to be shown on such joint return shall be taken into account under subparagraph (A).

(D) Exception not applicable unless additional payments are made with timely filed return

Subparagraph (A) shall not apply with respect to any period beginning after the earlier of—

(i)

the date prescribed for filing the income tax return for the taxable year (including extensions thereof), or

(ii)

the date on which such return was filed.

(b) Conforming amendment

The heading of section 6651(c) of such Code is amended by striking Rule and inserting Rules.

(c) Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2024.