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Penalty Relief

1.6 Million Taxpayers To Receive IRS Penalty Relief

By September 3, 2022No Comments

To help struggling taxpayers affected by the COVID-19 pandemic, the IRS is providing penalty relief to most people and businesses who file or filed certain 2019 or 2020 returns late.

This includes nearly 1.6 million taxpayers who will automatically receive more than $1.2 billion in refunds or credits. It is expected that many of these payments will be completed by the end of September.

In addition to providing relief to taxpayers affected by the pandemic, this decision is designed to allow the IRS to focus its efforts on processing backlogged tax returns and taxpayer correspondence. This should help return to normal operations before the 2023 filing season begins.

What Qualifies for Penalty Relief ?

The relief applies to the Failure to File Penalty. The penalty is normally assessed at 5% per month with a maximum of 25% of the unpaid tax when a federal income tax return is filed late. This relief applies to Form 1040 (Individual) and 1120 (Corporate) returns as well as others. To qualify for relief, any eligible income tax return must be filed on or before Sept. 30, 2022.

The IRS is also granting penalty relief to banks, employers, and other businesses required to file various information returns, such as those in the 1099 series. To qualify for relief, eligible 2019 returns must have been filed by Aug. 1, 2020, and eligible 2020 returns must have been filed by Aug. 1, 2021.

Because both deadlines fell on a weekend, a 2019 return will still be considered timely for purposes of relief provided if it was filed by Aug. 3, 2020, and a 2020 return will be considered timely for purposes of relief provided if it was filed by Aug. 2, 2021. Details on the information returns that are eligible for relief can be found in the notice issued by the IRS.

The notice also provides details on relief for filers of various international information returns, such as those reporting transactions with foreign trusts, receipt of foreign gifts, and ownership interests in foreign corporations. To qualify for this relief, any eligible tax return must be filed on or before Sept. 30, 2022.

Penalty relief will be automatic and therefore, eligible taxpayers need not apply for it. If already assessed, penalties will be abated. If already paid, the taxpayer will receive a credit or refund.
As a result, nearly 1.6 million taxpayers who already paid the penalty are receiving refunds totaling more than $1.2 billion. Most eligible taxpayers will receive their refunds by the end of September.

Penalty relief is not available in some situations, such as where a fraudulent return was filed, where the penalties are part of an accepted offer in compromise or a closing agreement, or where the penalties were determined by a court.

Other Penalty Relief Procedures

This relief is limited to the penalties that the notice specifically states are eligible. Penalties such as the Failure to Pay Penalty, are not eligible. But for these ineligible penalties, taxpayers may use existing penalty relief procedures, such as requesting abatement due to reasonable cause or the First-Time Abate program.

First-Time Abatement Penalty Relief is a one-time administrative abatement of late filing and late payment penalties where the taxpayer has:

  • Not previously been granted relief under this provision, and
  • Has been compliant in the three prior years.

Please contact East Coast Tax Consulting Group at 561-826-9303 for help with penalty relief or other tax debt problems.

Contact Us 

You deserve the best in IRS tax representation, tax preparation, and tax planning services. At East Coast Tax Consulting Group, you’ll work with a licensed CPA who will handle your case from beginning to end. We invite you to contact our team to schedule a free, confidential consultation.

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