Tax Byte

with Jessica L. Jeane, J.D.

IRS Provides Broad Penalty Relief for Certain 2019, 2020 Returns

Jessica L. Jeane, J.D.

Jessica L. Jeane, J.D.

Sr. Director, Tax & Product Development

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Today, the IRS announced that it is providing broad penalty relief for certain 2019 and 2020 individual and business returns.

Penalty Relief

Under Notice 2022-26, released August 24, 2022, relief is provided for taxpayers from certain failure to file penalties and certain international information return (IIR) penalties with respect to taxable years 2019 and 2020 returns that are filed on or before September 30, 2022. Additionally, the IRS is providing relief from certain information return penalties for 2019 returns that were filed on or before August 1, 2020, and with respect to taxable year 2020 returns that were filed on or before August 1, 2021.

The relevant penalties will be automatically waived or, to the extent previously assessed, abated, refunded, or credited as appropriate, with no requirement that taxpayers request such relief. “This penalty relief will be automatic for people or businesses who qualify; there’s no need to call,” IRS Commissioner Chuck Rettig said.

There’s definitely a joke in there somewhere about the odds of actually getting through to the IRS by phone anyway, but in good faith we’ll leave that one alone for now.

Notably, nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in refunds or credits, according to the IRS. The agency estimates that many of these payments will be completed by the end of September.

The list of applicable income and information returns, which includes both the Form 1040 and 1120 series among others, can be found beginning on page five of the notice HERE.

Backlog Woes

This penalty relief notice comes on the heels of a recent letter sent to Rettig from over 90 bipartisan, bicameral lawmakers requesting certain information regarding the IRS’s efforts to remedy the ongoing backlog by year’s end. So it comes as no surprise then that the relief is designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help the agency return to normal operations for the 2023 tax filing season.

“Penalty relief is a complex issue for the IRS to administer,” Rettig said. “We’ve been working on this initiative for months following concerns we’ve heard from taxpayers, the tax community and others, including Congress. This is another major step to help taxpayers, and we encourage those affected by this to review the guidelines.”

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