IRS Announces New Penalty Relief for Certain 2020 and 2021 Tax Returns
The IRS announced last month that it would be waiving late payment penalties for tax years 2020 and 2021 for certain taxpayers. The waivers apply to taxpayers with tax assessments of less than $100,000 for 2020 and/or 2021 and who were issued an initial balance due notice on or before December 7, 2023.
During COVID, the IRS suspended sending late payment reminders to taxpayers although penalties continued to accrue. As the IRS prepares to return to normal collection efforts, this relief will help ease the pain for many taxpayers. The agency estimates 4.7 million individuals, businesses, trusts, estates, and tax-exempt organizations are eligible for the penalty relief, representing $1 billion in savings to taxpayers.
The waivers are automatic – taxpayers do not need to take any action. The IRS plans to send out letters this month to alert taxpayers of their current balances due and the amount of penalty relief applied if applicable. Eligible taxpayers that have already paid the penalties and have no other tax liabilities will be receiving refunds.