NEWS ALERT!
IRS PENALTY RELIEF DEADLINE IS SEPTEMBER 30, 2022
Instant Penalty Relief for 2019 and 2020 Returns due to COVID Delays
On August 24, 2022, the Internal Revenue Service (“IRS”) issued Notice 2022-36, which provides Penalty Relief to individuals and businesses who have filed, or will file certain 2019 or 2020 returns late.
The deadline to file these returns is September 30, 2022, to get the late-filing penalties waived.
This penalty relief is meant to ensure fairness. It was designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence that built up during the pandemic. The IRS hopes this relief will help them return to normal operations for the 2023 filing season.
The eligible IRS penalties for this COVID relief will be automatically abated, refunded, or credited.
To Which Penalties, Forms & Years Does the Relief Apply?
The IRS will grant relief for failure-to-file (FTF) penalties on the following 2019 and 2020 federal tax returns:
- Income Tax Returns: Most Form 1040 & 1120 series return
- Also Forms 1041, 1065, 1066, 990-T & 990-PF
- Information Returns
- Those that filed tax year 2019 and 2020 Information Returns (other than International Information Returns) on or before August 3, 2020, and August 2, 2021, respectively, will have any portion of an information return penalty that is the result of late filing abated.
- Information returns are not tax returns; they are documents submitted to the IRS by third-party payors, not taxpayers.
- International Information Returns (IIRs) assessed a penalty at filing.
The Failure to File Penalty under I.R.C. § 6651(a)(1) is typically assessed at a rate of 5% per month, up to 25% of the unpaid tax when a federal income tax return is filed late.
Automatic Penalty Relief
The penalty relief will be automatic for individuals and businesses who qualify.
To qualify for this relief, any eligible income tax return must be filed on or before September 30, 2022.
The penalties within the scope of the IRS’s relief will be automatically abated, refunded, or credited, as appropriate, without requiring Taxpayers to request this relief.
The 1.6 million Taxpayers who have already paid these penalties should automatically receive refunds or credits by the end of September.
- Those that received a bill for a FTF penalty, it will be reversed, even if you already requested abatement and it was denied.
- Those that already paid the penalty are entitled to a refund. However, if they have a liability with the IRS, the refund will be applied to pay off the oldest liability first. If there is any money remaining, a refund for the remainder will be issued to the Taxpayer.
Exceptions for Penalty Relief
This broad penalty relief does not apply to all FTF penalties. Penalties will not be abated where:
- a fraudulent return has been filed
- penalties are part of an accepted offer-in-compromise
- a court determined penalties should be applied.
Penalty relief also does not apply to the Failure-to-Pay Penalties. However, Taxpayers may seek to have such penalties abated using existing processes such as reasonable cause.
Act Now to Qualify For Penalty Relief
If you are required to file an income tax return for 2019 or 2020 and have not already done so, you must act by September 30, 2022.
Taxpayers who file any of these returns on or before September 30, 2022, will not be subject to penalties for late filing.
Sources:
https://www.irs.gov/newsroom/covid-tax-relief-irs-provides-broad-based-penalty-relief-for-certain-2019-and-2020-returns-due-to-the-pandemic-1-point-2-billion-in-penalties-being-refunded-to-1-point-6-million-taxpayers