The IRS announced on Wednesday that it will provide broad-based penalty relief for certain 2019 and 2020 returns due to the pandemic. The IRS issued Notice 2022-36, which will wipe out a variety of late fees for individuals and businesses impacted by the pandemic.
The IRS estimates that the worth of the penalty relief will total more than $1.2 billion for 1.6 million taxpayers. In addition to helping taxpayers, the step is designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season. While tax returns for 2019 and 2020 will be eligible for relief, taxpayers must file any late returns by September 30, 2022, for the fees to be forgiven. The IRS is also taking steps to help taxpayers who have already paid the penalties.
The relief is automatic so eligible taxpayers will not need to apply for it. Most eligible taxpayers will receive their refunds by the end of September. The relief applies to the failure to file penalty for both the Form 1040 and 1120 series, as well as others listed in the notice. Penalties for failing to file a tax return can be as much as 25% of the unpaid levies. The IRS will not forgive penalties for failing to pay or in situations where fraudulent returns were filed.
The IRS is also providing penalty relief to banks, employers, and other businesses required to file various information returns, such as those in the 1099 series. Eligible returns must have been filed by previous dates listed in the notice. More guidance is expected in the coming months.