The COVID-19 pandemic has undoubtedly caused immense hardship for millions of taxpayers. Recognizing this, the IRS has recently issued a crucial notice providing penalty relief for individuals and businesses who filed certain 2019 and 2020 tax returns late. This tax relief initiative offers a vital lifeline to countless taxpayers still grappling with the pandemic’s economic fallout.
Automatic Relief for Nearly 1.6 Million Taxpayers
The IRS’s penalty relief measure encompasses a staggering 1.6 million taxpayers, automatically granting them over $1.2 billion in refunds or credits. This translates to an average of over $750 per taxpayer, a significant boost for those struggling with financial burdens. Moreover, the majority of these refunds are expected to be processed by the end of September 2022, offering much-needed immediate financial assistance.
Beyond Individual Relief: Supporting Businesses and Streamlining Operations
This tax relief extends beyond individual taxpayers to encompass businesses impacted by the pandemic. By alleviating the burden of late filing penalties, the IRS aims to support economic recovery and encourage businesses to focus on their core operations. Additionally, this action frees up valuable IRS resources, enabling them to efficiently process backlogged returns and taxpayer correspondence, ultimately paving the way for a smoother 2023 filing season.
Understanding the Scope of Penalty Relief
The penalty relief primarily applies to the Failure to File Penalty, typically assessed at 5% per month and up to 25% of the unpaid tax for late-filed returns. This applies to a broad range of tax forms, including Form 1040 (Individual) and Form 1120 (Corporate) series. To qualify, eligible tax returns must be filed by September 30, 2022, a crucial deadline for taxpayers seeking this relief.
Additional Relief for Information Returns and International Filers
The IRS has also extended penalty relief to banks, employers, and other businesses required to file various information returns, such as those in the 1099 series. Additionally, specific international information returns involving foreign trusts, gifts, and foreign corporations are eligible for relief under the same September 30, 2022 deadline.
Automatic Refunds and Abatements
This tax relief initiative operates automatically, meaning no separate application is required. For eligible taxpayers who have already paid the penalty, it will be automatically abated. Those who overpaid will receive a credit or refund, with most refunds expected to be issued by the end of September.
Exceptions and Existing Penalty Relief Options
It’s important to note that penalty relief is not available in all situations. For instance, it does not apply to cases of fraudulent returns, accepted offers in compromise, or penalties finalized by a court. Additionally, other penalties, such as the Failure to Pay Penalty, are not eligible for automatic relief under this notice. However, taxpayers can explore existing penalty relief procedures for such situations, such as applying for relief under the reasonable cause criteria or the First-Time Abate program.
Time is of the Essence: File Your Returns by September 30, 2022!
To maximize the benefits of this tax relief initiative, taxpayers with unfiled 2019 and 2020 returns should take immediate action. Remember, the deadline to qualify for this relief is September 30, 2022. Don’t miss out on this valuable opportunity to alleviate your financial burden and receive potential refunds or credits.
In conclusion, the IRS’s tax relief measure for late 2019 and 2020 returns offers a much-needed lifeline for countless taxpayers still navigating the challenges of the pandemic. By understanding the scope of this relief, taking advantage of the automatic refunds and abatements, and meeting the critical September 30 deadline, taxpayers can significantly reduce their financial strain and pave the way for a brighter financial future.
