In an effort to help millions of taxpayers who were affected by COVID-19, the IRS recently announced that it will provide penalty relief to most people and businesses who filed certain 2019 or 2020 tax returns late.
To qualify for this relief, any eligible 2019 or 2020 income tax return that has not already been filed, must be filed on or before September 30, 2022.
Which tax returns are eligible for penalty relief?
This relief applies to the failure-to-file penalty. The penalty is normally assessed at a rate of 5% each month, up to 25% of the unpaid tax when the federal income tax return is filed late. This applies to various forms in both the 1040 and 1120 series.
What if I already paid a failure to file penalty for 2019 or 2020?
The IRS states there is nothing you have to do. If you already paid a failure to file penalty for 2019 or 2020 the IRS is taking steps to automatically issue refunds or credits to nearly 1.6 million taxpayers who may have already paid these penalties. According to the IRS, more than $1.2 billion in refunds or credits will be issued with many of these payments going out by the end of September 2022.
Are businesses eligible for this failure to file penalty relief?
The IRS is providing penalty relief to some small businesses, employers, and other businesses that are required to file information returns (for example those in 1099 series). To qualify for relief, eligible late 2019 tax returns must have been filed by Aug. 1, 2020, and eligible late 2020 returns must have been filed by Aug. 1, 2021.
Who is not eligible to receive the failure to file penalty relief?
There are a few situations where this penalty relief is not available. Some examples of situations where this penalty relief does not apply include but are not limited to:
- If the penalty was assessed as part of an examination.
- If a fraudulent return was filed.
- If penalties were part of an accepted offer in compromise or closing agreement.
- If penalties were finally determined by a court.
Note: This is relief for penalties due to failing to file a timely tax return and does not apply to failure to pay penalties. Taxpayers may use existing penalty relief procedures not eligible as part of this relief. More information about existing procedures is available on the Penalty Relief page of IRS.gov.
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