The Internal Revenue Service (IRS) issued an Administrative Notice on August 24, 2022, providing for penalty relief for late filed tax returns and late filed information returns for the taxable years 2019 and 2020. To qualify for the penalty relief, the taxpayers must submit any eligible tax return for these years on or before September 30, 2022. Relief from information return penalties for 2019 or 2020 will only be granted if the returns were filed before August 1, 2020, or August 1, 2021, respectively.
The IRS stated in its Notice that it will pay most of the refunds or apply credits with regard to late filed penalties that have already been assessed and paid without the need for filing a claim for the credit or refund. As a cautionary measure, taxpayers may prefer to submit claims for penalty relief in order to ensure that the penalties will be abated and any penalties that have been paid are refunded in a timely manner.
The announced penalty relief is intended to help struggling taxpayers affected by the COVID-19 pandemic. It will also allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return IRS operations to normal for the 2023 filing season. The Treasury Department and the IRS have determined that the penalty relief will allow the IRS to focus its resources more effectively.
The penalty relief for 2019 and 2020 covers additions to tax under IRC §6651(a)(1) for failure to file the following income tax returns:
- Form 1040 US Individual Income Tax Returns;
- Form 1041 US Income Tax Return for Estates and Trusts;
- Form 1120 US Corporate Income Tax Returns;
- Form 1066 US Real Estate Mortgage Investment Conduit Income Tax Returns;
- Form 990-PF Returns for Private Foundations or Section 4947(1) Trusts Treated as Private Foundations; and
- Form 990-T Exempt Organization Business Income Tax Returns.
In addition to penalty relief regarding the above-referenced federal income tax returns, the Notice provides that certain penalties under IRC Sections 6038, 6038A, 6038C, 6039F, 6677, 6698, 6699, and 6721(a)(2)(A) for failure to timely file information returns are also subject to relief.
Penalties for fraudulent failure to file under Section 6651(f), or the penalty for fraud under Section 6663, are not eligible for relief. Similarly, any penalties included in an accepted offer in compromise, settled in a closing agreement under Section 7221, or determined in a judicial proceeding are not eligible for relief.
If you have any questions regarding whether a penalty for 2019 or 2020 is subject to relief under the provisions of Internal Revenue Service Notice 2022-36, please contact a member of the Rhoades McKee Tax Group for assistance. The benefit could be substantial.More Publications