The Internal Revenue Service today released Notice 2022-36, which exempts the majority of individuals and organizations who file specific 2019 or 2020 forms late from penalties to assist struggling taxpayers impacted by the COVID-19 pandemic.
Additionally, the IRS is taking action to assist those who have already paid these penalties. Over $1.2 billion in refunds or credits will be given automatically to over 1.6 million taxpayers. By the end of September, many of these payments will have been made.
This action is intended to enable the IRS to concentrate its resources on handling backed-up 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 both individuals and businesses affected by the pandemic.
According to IRS Commissioner Chuck Rettig, the IRS “has worked hard throughout the pandemic to help the nation and provide relief to people in many different ways.”
“Today’s penalty relief is simply another way the agency is assisting people at this historic period. There is no need to call; this penalty reduction will be granted automatically to those who qualify.
The penalty for failing to file is exempt from the relief. When a federal income tax return is filed after the due date, a penalty of up to 25% of the unpaid tax is usually levied at a rate of 5% per month.
This relief applies to forms from the Form 1040 and Form 1120 series, as well as those identified in Notice 2022-36, which was published on IRS.gov today.
Any qualifying income tax return must be submitted before September 30, 2022, or earlier, to be eligible for this exemption.
The IRS also offers relief from penalties to banks, employers, and other businesses that must submit certain information returns, such as those in the 1099 series.
According to the notification, eligible 2019 returns had to be submitted by August 1, 2020, and eligible 2020 returns had to be submitted by August 1, 2021, to be eligible for relief.
Because both of these deadlines fell on the weekend, if a 2019 return was filed by August 3, 2020, it will still be considered timely for the purposes of the relief offered by the notice.
If a 2020 return was filed by August 2, 2021, it will also be considered timely for the purposes of the relief offered by the notice. The notice includes information about the information returns that qualify for relief.
The notice also includes information on relief for those who file various international information returns, including those that include information on dealings with foreign trusts, receiving gifts from abroad, and holding stock in foreign firms. Any qualifying tax return must be filed before September 30, 2022, or earlier, to be eligible for this relief.
Automatic relief; the majority of the $1.2 billion in refunds will be given to eligible taxpayers by the end of next month
There is automatic penalty relief. This indicates that qualified taxpayers do not have to apply for it. Penalties, if previously imposed, will be reduced. If previously paid, the taxpayer will be given a credit or refund.
Nearly 1.6 million taxpayers who had already paid the penalty are now getting refunds worth more than $1.2 billion. The majority of qualified taxpayers will get their refunds by the end of September.
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There are specific circumstances where penalty relief is not possible, including when a fraudulent return was filed when the penalties are a part of a closing agreement or an accepted offer in compromise, or when the penalties were ultimately decided by a court. You can find more information in Notice 2022-36 at IRS.gov.
This relief is only available for the penalties that are expressly listed as being exempt in the notification. The failure to pay penalties and other penalties is not acceptable.
However, for certain ineligible fines, taxpayers may use the already-in-place processes for penalty relief, such as requesting exemption under the First Time Abate program or the reasonable cause requirements. To learn more, go to IRS.gov/penaltyrelief.
The IRS has a difficult time managing penalty relief, according to Rettig. “This program has been in the works for months as a result of the concerns that taxpayers, members of the tax community, and others, including Congress, have expressed.
We urge people who will be impacted by this to evaluate the rules because it is yet another significant step in helping taxpayers.
