The IRS has released a notice that offers penalty reduction to the majority of individuals and
organizations who have filed certain 2019 or 2020 taxes late in order to assist struggling taxpayers affected by the COVID-19 epidemic. This includes about 1.6 million taxpayers who will automatically get refunds or credits totaling more than $1.2 billion. By the end of September, the majority of these payments will be finished. This activity is intended to allow the IRS to concentrate its resources on processing backlogged tax returns and taxpayer correspondence to help operations get back to normal in time for the 2023 filing season, in addition to providing relief to individuals and businesses affected by the pandemic. The Failure to File a Penalty is exempt from the remedy. When a federal income tax return is submitted late, the penalty is normally calculated at a rate of 5% per month and can reach a maximum of 25% of the unpaid tax. Forms 1040 (Individual) and 1120 (Corporate) series, as well as others, are covered by this relief.
Any qualifying income tax return must be submitted on or before September 30, 2022, in order to be eligible for this relief. If you haven't already filed your 2019 or 2020 taxes, call our office right now to take advantage of this relief. Banks, employers, and other companies that must submit different information forms, such as those in the 1099 series, are also granted penalty relief by the IRS. The notification specifies that eligible 2019 returns must have been submitted by August 1, 2020, and eligible 2020 returns must have been filed by August 1, 2021, in order to be eligible for relief. A 2019 return will still be regarded as timely for the purposes of the relief offered by the notice if it was filed by August 3, 2020, and a 2020 return will be regarded as timely for the purposes of the relief offered by the notice if it was filed by August 2, 2021, despite the fact that both deadlines fell on the weekend. Information on the information returns that qualify for the relief is included in the notification.
The notice also contains information on the relief available to persons who submit different
international information returns, including those that reflect dealings with foreign trusts, the receipt of gifts from abroad, and ownership stakes in foreign firms. Any qualifying tax return must be submitted on or before September 30, 2022, in order to be eligible for this relief. Relieving a penalty is automatic. Therefore, qualified taxpayers are exempt from making an application. Penalties that have already been imposed will be reduced. The taxpayer will be given a credit or refund if they have already paid. A total of more than $1.2 billion in refunds are now being given to roughly 1.6 million people who had paid the penalty. By the end of September, the majority of qualified taxpayers will have received their refunds. In some circumstances, such as when a false return was filed, when the penalties are a part of an approved offer in a compromise or closing agreement, or when the penalties were ultimately decided by a court, penalty relief is not possible.
This remedy is only available for the fines that are clearly listed in the notification as being exempt. The Failure to Pay Penalty and other penalties are ineligible. The First-Time Abate programmed or requesting relief under the reasonable cause requirements are two options taxpayers have for these invalid fines. Penalty for First-Time Abatement Relief is a one-time administrative reduction of the fines for
late filing and late payments where the taxpayer: • Has not previously received relief under this section; and
• Has been accepted with the law for three years. If you have unfiled 2019 and 2020 returns, please get in touch with this office as soon as you can to take advantage of the penalty relief. To be eligible for this relief, taxes must be submitted before September30, 2022.