Big News: IRS Provides Late-Filing Penalty Relief to Taxpayers

In a big win for taxpayers, the IRS is providing penalty relief for tax years 2019 and 2020. The best part for you, if you qualify, is that you do not need to do anything to obtain relief. The IRS is going to review accounts that may qualify and refund any money for penalties already paid or adjust the balance due to remove such penalties. Here is a link to the IRS notice: Notice 2022-36

As most of my audience is individuals and small businesses, I will not go into the part of the relief regarding international information returns. I will, however, discuss the two major pieces of relief for filers of income tax returns and information returns.

Late Filing of an Income Tax Return

For taxpayers who are required to file an annual income tax return, such as Form 1040, 1041, or 1120, you will be able to obtain relief for any late filing penalties for tax years 2019 and 2020. You qualify you will need to have either already filed those returns or file them on or before September 30, 2022. You heard that right! If you are a late LATE filer for tax years 2019 and 2020, you can avoid a potential penalty up to 25% of the balance due by filing before September 30^th of this year.

If you are a fiscal year filer, meaning your year-end is not December 31^st, then you can obtain relief for fiscal years that began in 2019 and 2020, respectively. Again, you need to have those returns filed on or before September 30^th of this year.

Late Filing of an Information Return

The IRS will also abate late filing penalties for partnership and s-corporation returns (considered information returns as no income tax is paid by the entity). The IRS notice is not explicit as to whether the September 30^th deadline applies to these returns as well. I must assume that it does. My advice is that if you have an unfiled filed partnership or s-corp return to get it filed before September 30^th, 2022.

This abatement waiver also applies to other information returns. The Notice does not list specifically the forms that qualify but it appears that most 1099 forms, such as for dividends, interest and royalties, qualify. Unlike the above income and information returns, the September 30^th, 2022 deadline does not apply. Instead, the IRS will waive the penalties for late filed information returns if the return (while late filed) was filed no later than August 1^st. So if the 2019 return was due in 2020 then it must have been filed no later than August 1^st, 2020.

Some Exceptions

Not everyone or every return qualifes for relief. Here are some exceptions:

• Does not apply to any penalties not specifically listed in the notice
• Does not apply to any returns which fraud penalty or penalty for fraudulent failure to file penalty applies (see IRC 6651(f) or IRC 6663).
• Does not apply to any penalties part of an accepted offer in compromise, as the offer is considered a settlement of all liabilities between the IRS and the taxpayer.
• Does not apply to any penalty settled in a closing agreement or determined in a judicial proceeding

Contact Us

I am Maine’s IRS Problem Solver. My firm helps Maine taxpayers in trouble. If you or someone you know in Southern Maine wants more information on how to resolve your unpaid taxes, please feel free to contact me directly at 207-502-7181 or by filing out my contact form. A Maine tax attorney can help you consider your options.

James D. Wade, Esq.
Law Office of James D. Wade
57 Portland Road, Unit 3
Kennebunk, ME 04043
207-502-7181
jwade@jdwadelaw.com
www.jdwadelaw.com