IRS Provides Tax Penalty Relief for Certain Late Filed Returns

By and on August 26, 2022

In Notice 2022-36, the Internal Revenue Service (IRS) announced relief for taxpayers who failed to file certain tax and information returns with respect to tax years 2019 and 2020. The relief, which will be automatic, is provided if taxpayers file the missing forms by September 30, 2022. Once filed, the penalties will be waived or to the extent previously assessed, abated, refunded or credited to taxpayers.

The reason for this unprecedented relief is based upon the COVID-19 pandemic. In the Notice, the IRS explains that with a blanket abatement of penalties, IRS personnel can focus resources on processing the millions of returns backlogged by the pandemic and facilitate the IRS to get back to business as usual.

The IRS will abate any and all civil tax penalties related to failing to timely file the following returns:

  • The Form 1040 series
  • The Form 1041 series
  • The Form 1120 series
  • Form 1066
  • Form 990-PF
  • Form 1065.

The IRS will also abate the civil tax penalties asserted pursuant to Internal Revenue Code (IRC) Sections 6038, 6038A, 6038C, 6039F and 6677 for failing to timely file the following international information returns:

  • Forms 5471 and 5472
  • The Form 3520 series.

Additionally, the IRS will not impose penalties under IRC Section 6721(a)(2)(A) for failure to timely file any information return (as defined in IRC Section 6724(d)(1), e.g., certain Form 1099s) 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
  • 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.

Penalty relief, however, does not apply in situations where fraud was involved or if the tax penalty was settled under an Offer in Compromise or Closing Agreement.

Practice Point: Numerous civil tax penalties apply to taxpayers who fail to timely file certain tax and information returns—and those penalties can add up, accruing underpayment interest until paid. Notice 2022-36 is welcome relief to taxpayers who did not timely file as these penalties have been a bane to those who could not timely file their returns because of COVID-19 or did file timely but their returns have been sitting in an IRS center waiting to be processed. We have helped numerous taxpayers obtain abatement for these penalties over the last two years, and the process takes a lot of time and resources to complete. With this announcement, hopefully the IRS can redirect its limited resources to backlogged tax returns it has not been able to process since the pandemic began in early 2020.

Kevin Spencer
Kevin Spencer focuses his practice on tax controversy issues. Kevin represents clients in complicated tax disputes in court and before the Internal Revenue Service (IRS) at the IRS Appeals and Examination divisions. In addition to his tax controversy practice, Kevin has broad experience advising clients on various tax issues, including tax accounting, employment and reasonable compensation, civil and criminal tax penalties, IRS procedures, reportable transactions and tax shelters, renewable energy, state and local tax, and private client matters. After earning his Master of Tax degree, Kevin had the privilege to clerk for the Honorable Robert P. Ruwe on the US Tax Court. Read Kevin Spencer's full bio.

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