In a historic move, the IRS has announced it will waive most late filing penalties for the 2019 and 2020 tax years. In an effort to provide relief to taxpayers affected by the COVID-19 pandemic and get them into compliance as well as help the IRS focus its resources on processing backlogged tax returns and mail, the IRS will eliminate approximately $1.2 billion in penalties. Under Notice 2022-36, the IRS will automatically abate late filing penalties and provide refunds or credits to the estimated 1.6 million taxpayers who have already paid penalties. This is expected to be completed by the end of September 2022. Taxpayers who have not yet filed certain tax returns for information reporting will be able to take advantage of this notice if they file by September 30, 2022.
UPDATE: The IRS has extended the deadline for taxpayers in declared disaster areas to qualify for late filing penalty relief from their 2019 and 2020 tax returns. With this latest guidance, individuals and households that reside or have a business in a FEMA declared disaster area will have an extended period to file their tax returns, avoid penalties and get into compliance. The updated deadlines are noted below:
Areas with a deadline of Nov. 15, 2022 include:
- Counties in Missouri identified under FEMA’s Major Disaster Declaration 4665
- Counties in Kentucky identified under FEMA’s Major Disaster Declaration 4633
- The island of St. Croix in the U.S. Virgin Islands
- Members of the Tribal Nation of the Salt River Pima Maricopa Indian Community
Areas with a deadline of Feb. 15, 2023 include:
- Puerto Rico
- North Carolina
- South Carolina
- Areas in Alaska identified under FEMA’s Major Disaster Declaration 4672
- Hinds County, Mississippi
Below is a summary of the IRS Tax Notice:
Who Is Eligible for Relief?
The notice provides relief to income tax filers and extends to certain domestic and international information return filers. To qualify for this relief, taxpayers must file their returns by specific dates:
- Income tax filers must file their returns on or before September 30, 2022
- Information return filers including banks, employers and other businesses must have filed a 2019 return by August 3, 2020 and a 2020 return by August 2, 2021
- International information return filers must file on or before September 30, 2022
Which Returns Are Eligible for Relief?
The late filing relief applies to:
- Individual income tax returns in the 1040 series, including Forms 1040, 1040-C, 1040-NR, 1040 NR-EZ, 1040 (PR), 1040-SR and 1040-SS
- Estate and trust income tax returns, including Forms 1041, 1041-N and 1041-QFT
- Business income tax returns, including Forms 1120, 1065, 1120-S 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC and 1120-SF
- U.S. Real Estate Mortgage Investment Conduit Income Tax Return Form 1066
- Exempt organization income tax returns including Forms 990-PF and 990-T
The relief does not apply to interest on tax dues paid late nor any penalties for filing a fraudulent return. Penalties included in an accepted offer-in-compromise, settled in an IRS closing agreement or determined by a court are also ineligible for relief. Taxpayers may invoke other penalty relief procedures, such as the First Time Abatement program, to receive relief for penalties not covered by the Tax Notice.
What Are the Next Steps for Taxpayers?
Those who already paid late filing penalties covered by the notice will not need to take any further steps to receive relief as processes for abatement and refunding are automatic. If you have questions about eligibility or how this notice may affect you or your business, please contact a member of the Janover team today.