IRS Waiving Late Filing Penalties for 2019 & 2020 Federal Income Tax Returns
The IRS is not collecting all the money it can? Sounds off brand - but it’s true! Due to COVID-19 pandemic struggles, the IRS has decided to waive roughly $1.2 billion in late filing penalties, resulting in 1.6 million taxpayers getting a refund.
How much is the late filing penalty?
The failure-to-file penalty is usually assessed at 5% of the total of unpaid taxes for each month, with a cap of 25% of the total unpaid taxes. This penalty is usually a bit higher for businesses that fail to file on time.
“The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time”
- Chuck Rettig, IRS Commissioner
You should be aware that the relief does not apply to a separate failure-to-pay penalty. If you unsure if these penalties apply to you, please contact your accountant.
Why did the IRS decide to waive these penalties?
The IRS is going through a bit of an overhaul. With outdated systems and a slew of employees preparing to retire, the agency is trying to update and modernize itself. With the $80 billion in funding from the Inflation Reduction Act, the IRS is trying to look forward, not backward.
This decision allows the agency to focus its resources on getting through their sizeable backlog of returns and taxpayer inquiries in hopes of getting back to normal for the 2023 tax filing season.
What else should I know about this?
First off, make sure you know the dates. If you still haven’t filed tax returns for the 2019 or 2020 season, you have until September 30 to file to take advantage of and avoid these late filing penalties. If you need to apply for penalty relief, you should send a Form 843 with a letter citing the reasonable cause for your request or call the IRS to ask for a first-time penalty abatement.
Also, you should be aware that while this is helping those who filed late for the 2019 and 2020 tax years, it does not extend to 2021! Taxes were due April 18, 2022 for the 2021 tax year and if you requested and were granted an extension, that deadline is fast approaching as well - October 17, 2022.
If you’re one of the 19 million Americans who requested an extension, but still don’t have a plan to file your taxes, get in touch with us. We’ll take care of your taxes, work with you on reducing your tax bill, and provide audit support to keep you protected.
