IRS Announces Penalty Relief for Certain 2019 and 2020 Returns – Investopedia
Most people and businesses who file (or filed) certain 2019 or 2020 tax returns late are going to receive penalty relief in the form of refunds or abatements from the Internal Revenue Service (IRS). Even if you already paid those penalties, the IRS intends to issue refunds or credits. The agency says nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in payments by the end of September.
IRS Commissioner Chuck Rettig says:"This penalty relief will be automatic for people or businesses who qualify; there's no need to call."
This move targets taxpayers affected by the COVID-19 pandemic. It will also benefit the IRS, which plans to focus its resources on processing backlogged tax returns instead of tracking penalties. The goal is to return to normal operations for the 2023 filing season beginning in January.
The relief applies to a failure to file penalty for tax years 2019 and 2020 and includes forms in both the Form 1040 and 1120 series. A full list of impacted forms can be found in IRS Notice 2022-36PDF.
Date by which affected tax returns for 2019 and 2020 must be filed in order to be eligible for relief.
Failure to file penalties will be automatically abated, refunded, or credited, as appropriate without any need for the taxpayer to request relief for the following income tax returns:
Penalties for failure to timely file an Industry Issue Resolution (IIR), designed to resolve certain business tax issues are also abated as well as several other business-related tax forms listed in IRS Notice 2022-36PDF.
The typical IRS penalty failure to timely file is 5% per month up to 25% of the unpaid tax.
In addition to forms not mentioned above, penalty relief is not available in certain situations, such as:
Relief is limited to penalties specifically stated in IRS Notice 2022-36PDF. Other penalties, such as the failure to pay penalty, are not eligible. For ineligible penalties, you may use existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First Time Abate
program.
As part of a continuing response to taxpayer issues with the COVID-19 pandemic, the IRS is issuing penalty abatements, refunds, or credits for taxpayer and business tax returns and certain other forms for taxable years 2019 and 2020. The deadline to file related returns is Sept. 30, 2022. Most taxpayers will automatically receive their refund by the end of September.
A side benefit of this $1.2 billion refund program will allow the IRS to concentrate resources on a backlog of unprocessed tax returns from 2021. This latest IRS program is not related to the regular IRS Penalty Relief for Reasonable Cause program, which continues.
Internal Revenue Service. "COVID tax relief: IRS provides broad-based penalty relief for certain 2019 and 2020 returns due to the pandemic; $1.2 billion in penalties being refunded to 1.6 million taxpayers."
Internal Revenue Service. "Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020."
Internal Revenue Service. "Fact Sheet: Industry Issue Resolution (IIR) Program (April 2016)."
Internal Revenue Service. "Penalty Relief for Reasonable Cause."
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