Internal Revenue Service provides broad-based penalty relief for certain 2019 and 2020 returns due to the pandemic
To help struggling taxpayers affected by the COVID-19 pandemic, on August 24, 2022, the Internal Revenue Service issued guidance which provides penalty relief to most people and businesses who have filed certain 2019 or 2020 returns late.
Penalty relief is automatic. This means that 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. According to the IRS many of these payments will be completed by the end of September 2022. Nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in refunds or credits.
The relief applies to the failure to file penalty. To qualify for the relief, eligible tax returns must be filed by September 30, 2022.
Tax returns eligible for this penalty relief include specified returns in the Form 1040, 1041, 1065, 1120, and 1120 series, as well as others listed in Notice 2022-36, posted on IRS.gov.
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.
In addition, the IRS is providing 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, the notice states that eligible 2019 Form 1099s must have been filed by Aug. 3, 2020, and eligible 2020 Form 1099s must have been filed by Aug. 2, 2021.
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 finally determined by a court.
Some penalties, such as the failure to pay penalty, are not eligible for this relief. Taxpayers may use other existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First-Time Abate program.
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