Are you yet to file your 2019 or 2020 tax returns, or did you already file them but late?
Generally, the IRS imposes a late filing penalty on tax returns filed after the relevant deadline. This onerous penalty may add up to 25% of the tax owed, before adding statutory interests, and amounts to billions of dollars, annually, against taxpayers.
Great News!!! Under a new relief program, the IRS will waive these penalties and even refund taxpayers who have already paid the penalties for the late-filed 2019 or 2020 returns.
To qualify for this relief, any eligible income tax return, not already filed, must be filed on or before September 30, 2022
For taxpayers who have already paid these penalties, nearly 1.6 million taxpayers, they will automatically receive more than $1.2 billion in refunds or credits. IRS has promised that many of these payments will go out by the end of September, 2022.
Which returns are eligible
The relief applies to the failure to file penalty. The penalty is typically assessed at a rate of 5% per month, up to 25% of the unpaid tax when a federal income tax return is filed late. It applies to forms in both the 1040 and 1120 series, as well as others listed in the IRS Notice 2022-36.
Small businesses, employers and other businesses may also be eligible
In addition, the IRS is providing penalty relief to small businesses, employers and other businesses required to file various information returns, such as those in the 1099 series. To qualify for relief, eligible 2019 returns must have been filed by August 1, 2020, and eligible 2020 returns must have been filed by August 1, 2021.
A 2019 return will be considered timely for purposes of relief if it was filed by August 3, 2020, and a 2020 return, if it was filed by August 2, 2021. Taxpayers should review the IRS Notice 2022-36 for full details on the information returns that are eligible for relief.
The Notice also provides details on relief for certain international information return penalties that are assessed systemically or during return processing. To qualify, any eligible tax return must be filed on or before September 30, 2022. However, this relief does not apply if the penalty was assessed as part of an examination.
Which tax returns are not eligible
Penalty relief is not available in all 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.
Other penalties, such as the failure to pay penalty, are also not eligible. However, taxpayers may use existing penalty relief procedures for penalties not eligible under Notice 2022-36.
If you live in New York or the Tri-State area and have any questions about late filing penalty or any tax-related issue, call 212-490-0704 today for a FREE consultation. You can also learn more online – THE TAX EXPERTS.
