IRS Announces Penalty Relief for Certain 2019 and 2020 Taxpayer Returns

IRS to refund taxpayers over $1.2 billion in late filing penalties

For some taxpayers, the IRS has agreed to provide relief on certain penalties that were assessed. On August 24, 2022, The IRS released Notice 2022-36  announcing penalty relief for certain taxpayers whose returns were filed late in 2019 or 2020 during the pandemic. The announcement for relief came after requests that felt many of the penalties imposed by the IRS for late-filing or non-filing were in error due to delays in the IRS tax return processing time or in some cases, not processing returns at all.

The IRS will automatically abate, remove, or refund penalties already assessed without further action by taxpayers. Many of these payments and credits will be completed by the end of September 2022.

Which Taxpayers Qualify for Late Filing Penalty Relief?

The late filing penalty will be waived for the following taxpayer returns, if the returns are filed on or before September 30, 2022.

1) Forms 1040 including – Form 1040, U.S. Individual Income Tax Return and others.

2) Forms 1041 including – Form 1041, U.S. Income Tax Return for Estates and Trusts and others

3) Forms 1120 including – 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-L, U.S. Life Insurance Company Income Tax Return; Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return; 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 others

4) Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return; and others

5) 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)).

Partnership and S Corporation Return Penalties

The late filing penalty will be waived for the following returns if the returns are filed on or before September 30, 2022:

• Penalties for failure to timely file and for failure to show the required information on a Form 1065, partnership return.
• Penalties for failure to timely file and for failure to show the required information on a Form 1120-S, S corporation return.

Limited Penalty Relief for Failure to File IRS Information Returns (e.g., 1099s)

The IRS says it will not impose the penalties for failure to timely file any information return that meets the following criteria:

• 2019 returns that were filed on or before August 1, 2020, with an original due date of January 31, 2020; February 28, 2020 (if filed on paper) or March 31, 2020 (if filed electronically); or March 15, 2020; or 2020 returns that were filed on or before August 1, 2021, with an original due date of January 31, 2021; February 28, 2021 (if filed on paper) or March 31, 2021 (if filed electronically); or March 15, 2021.

International Information Returns

The IRS will waive penalties for systematically assessed late filing of Form 5471and 5472 that was attached to a late filed Form 1120 or Form 1065.

What Penalties Do Not Apply to the Waiver?

According to the IRS, the waiver does not apply in the following circumstances:

1. Penalties not listed above.
2. If there is a fraudulent failure to file
3. Penalties in an accepted offer in compromise
4. Penalties in a closing agreement
5. Penalties finally determined in a judicial proceeding

For detailed information and a full listing of taxpayers that qualify for the waiver, refer to the IRS Penalty Relief page.

If you received notices from the IRS for the above penalties during this time frame, you should monitor your mail for correspondence from the IRS.  Questions on this or other business or executive tax matters? Contact your Keiter Opportunity Advisor or Email | Call: 804.747.0000