IRS to Provide Penalty Relief for Tax Returns Filed Late Due to COVID-19

Aug 31, 2022 | COVID-19, GTM Blog, Newsworthy

To help taxpayers affected by the COVID-19 pandemic, the IRS is providing penalty relief to most people who filed 2019 or 2020 returns late including those who have already paid their penalties. Nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in refunds or credits.

To help taxpayers affected by the COVID-19 pandemic, the Internal Revenue Service is providing penalty relief to most people who filed certain 2019 or 2020 returns late.

The IRS is also taking an additional step to help those who paid these penalties already. Nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in refunds or credits. Many of these payments will be completed by the end of September.

The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time. This penalty relief will be automatic for people or businesses who qualify; there’s no need to call. – IRS Commissioner Chuck Rettig

The relief applies to the failure to file penalty. This penalty is typically assessed at a rate of 5 percent per month and up to 25 percent of the unpaid tax when a federal income tax return is filed late. This relief applies to forms in both the Form 1040 and 1120 series, as well as others listed in Notice 2022-36.

To qualify for this relief, any eligible income tax return must be filed on or before September 30, 2022.

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.

As a result, nearly 1.6 million taxpayers who already paid the penalty are receiving refunds totaling more than $1.2 billion. Most eligible taxpayers will receive their refunds by the end of September.

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. For details, see Notice 2022-36.

This relief is limited to the penalties that the notice specifically states are eligible for relief. Other penalties, such as the failure to pay penalty, are not eligible. But for these ineligible penalties, taxpayers may use existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First Time Abate program. Visit IRS.gov/penaltyrelief for details.

Penalty relief is a complex issue for the IRS to administer. We’ve been working on this initiative for months following concerns we’ve heard from taxpayers, the tax community and others, including Congress. This is another major step to help taxpayers, and we encourage those affected by this to review the guidelines. – IRS Commissioner Chuck Rettig

Besides providing relief to individuals impacted by the pandemic, this 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.

GTM can help

Tax season is stressful enough without the added burden of accounting for nanny taxes and the additional paperwork (W-2s, W-3s, and Schedule H). Let GTM Payroll take care of this for you. Our year-end package – which is in addition to any nanny tax and payroll service – provides a Form W-2 to your employee, files forms W-2 and W-3 with the federal government and creates a Schedule H for you to file with your personal tax return. To learn more, call (800) 929-9213 for a complimentary, no-obligation consultation with a household employment expert. Or schedule time with us at your convenience.