The IRS is providing penalty relief to certain taxpayers who filed their 2019 and/or 2020 tax returns late. The penalty relief also extends to certain domestic and international information return filers. Under Notice 2022-36 released by the IRS, the Internal Revenue Service is providing penalty relief to most individual and business taxpayers who filed their 2019 and/or 2020 returns late due to the COVID-19 pandemic, while refunding $1.2 billion in penalties to nearly 1.6 million taxpayers who filed late. The IRS said it will automatically pay most of the refunds or apply credits by the end of September 2022; noting that taxpayers do not need to contact them to request a refund.
Who qualifies for relief? For income tax filers to qualify for this penalty relief, any “eligible income tax return” must be filed on or before September 30, 2022. For those with an outstanding 2019 and/or 2020 income tax return, if they file it before September 30, 2022, they won’t have to pay the failure-to-file penalty.
Which returns are eligible for penalty relief? Eligible tax returns include:
- Individual income tax returns: Form 1040, U.S. Individual Income Tax Return; Form 1040-C, U.S. Departing Alien Income Tax Return; Form 1040-NR, U.S. Nonresident Alien Income Tax Return; Form 1040-NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents; Form 1040 (PR), Federal Self-Employment Contribution Statement for Residents of Puerto Rico; Form 1040-SR, U.S. Tax Return for Seniors; and Form 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico);
- Estate and trust income tax returns: Form 1041, U.S. Income Tax Return for Estates and Trusts; Form 1041-N, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts; and Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts;
- Business income tax returns: Form 1120, U.S. Corporation Income Tax Return; Form 1120-C, U.S. Income Tax Return for Cooperative Associations; Form 1120-F, U.S. Income Tax Return of a Foreign Corporation; Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation; Form 1120-H, U.S. Income Tax Return for Homeowners Associations; Form 1120-L, U.S. Life Insurance Company Income Tax Return; Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons; Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return; Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations; Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts; Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies; and Form 1120- SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B);
- Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return; and
- Exempt organization income tax returns, including Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation; and Form 990-T, Exempt Organization Business Income Tax Return (and Proxy Tax Under Section 6033(e)).
- U.S. Income Tax Return for an S corporation and Form 1065, U.S. Return of Partnership Income.
Who doesn’t qualify for penalty relief? Penalty relief isn’t available to taxpayers who 1) filed a fraudulent return, 2) accepted an offer-in-compromise that included penalties, 3) entered into a closing agreement with the IRS for an otherwise eligible 2019 or 2020 return, or 4) had penalties determined by a court.
Along with providing relief to both individuals and businesses affected by the COVID-19 pandemic, the IRS will be able to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 tax filing season. Please contact our office if you have any questions as it pertains to your situation.