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COVID Tax Tip 2022-139, September 12, 2022

To help struggling taxpayers affected by the COVID-19 pandemic, the IRS recently issued Notice 2022-36, which provides penalty relief to most people and businesses who filed certain 2019 or 2020 returns late.

To qualify for this relief, any eligible income tax return, not already filed, must be filed on or before September 30, 2022

The agency is also taking an additional step to help those who paid these penalties already. Nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in refunds or credits. Many of these payments will go out by the end of September.

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 notice.

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 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. For complete details, taxpayers should read Notice 2022-36, available on IRS.gov.

Other penalties, such as the failure to pay penalty, are not eligible. However, taxpayers may use existing penalty relief procedures for penalties not eligible under Notice 2022-36. More information about existing procedures is available on the Penalty Relief page of IRS.gov.

Source: IRS.gov