New IRS Penalty Relief
On August 24, 2022, the IRS announced that it will waive and refund late filing (Failure to File) penalties for taxpayers who filed their 2019 and/or 2020 tax returns late. The penalty relief applies to 2019 and 2020 individual, corporate, and partnership returns. Note that the relief does not apply to Failure to Pay penalties.
The Failure to File Penalty is based on how late you file your tax return after the due date or extended due date. For personal returns, the Failure to File Penalty is 5% of the unpaid taxes for each month that a return is late, and such penalty will not exceed 25% of your unpaid taxes.
If you have already paid failure to file penalties to the IRS for tax years 2019 or 2020, you do not need to do anything to receive your refund. The penalty relief is automatic. The IRS will be automatically refunding the penalties by the end of September. According to the IRS, more than $1.2 billion in refunds will be refunded to almost 1.6 million taxpayers.
If you have not yet filed your 2019 or 2020 returns, you can still qualify for penalty relief if you file by September 30, 2022.
The late filing penalty relief also applies to late filed 1099s. Eligible 2019 1099s must have been filed by August 3, 2020 and eligible 2020 1099s must have been filed by August 2, 2021.
The penalty relief is designed to allow the IRS to focus its efforts on processing backlogged tax returns and taxpayer correspondence to help the agency return to normal operations for the 2023 filing season.