I had a sizable Realized Gain event in Q3. Instead of making an Estimated Tax payment in Q3, I decided to increase the payroll deduction in Q4 to fully cover the 110% of the prior year tax before the year-end. However, in a month I lost the job and became Unemployed, and thus the tax withholding via payroll stopped. It was already too late to send the Estimated Tax for Q3. At the year-end I paid the Q4 Estimated Tax that fully covered the liability and even resulted in a refund. (And in Q1 and Q2 I was ahead of schedule with tax withholding/payments.)

Anyway, for Q3 there was an underpayment and it resulted in a penalty. I completed the form 2210 and used Annualized method that lowered the penalty somewhat (from $162 to $90).

Now, I would like to check the box B and ask for a waiver (will put in the whole penalty amount). My question is whether the above situation would be considered a valid reason to ask for a waiver, or practically IRS would likely deny it?

(I can provide copies of paychecks showing the increase in tax withholding, proving the good faith efforts. I have a letter confirming my Unemployment as of the end of September. I can attach it as a proof. Just not sure if the IRS would consider it a valid reason for a waiver...)

Also, would asking for a waiver and thus making the IRS to hand-touch the return increase the risk of an Audit?

Thank you!