IRS To Offer Penalty Relief To Eligible Taxpayers Who File Delinquent 2019 and 2020 Returns By September 30, 2022

Posted in Offshore Account Update on September 16, 2022 | Share

The Internal Revenue Service (IRS) recently announced that it will be offering penalty relief to taxpayers, both individuals and businesses, that failed to timely file certain 2019 and 2020 returns during the COVID-19 pandemic. While the IRS will automatically issue more than $1.2 billion in refunds or credits to taxpayers that have already paid penalties, taxpayers who are not eligible to receive this automatic relief can have their failure-to-file penalties “waived or, to the extent previously assessed, abated, refunded, or credited” if they file in time.

Taxpayers Must File By September 30, 2022 To Be Eligible for Penalty Relief

As the IRS explains in Notice 2022-36, the agency will not impose failure-to-file penalties for eligible tax returns for the 2019 and 2020 tax years that are filed on or before September 30, 2022. For taxpayers that file by this deadline, all otherwise applicable penalties will be “abated, refunded, or credited, as appropriate without any need for taxpayers to request this relief.” The penalties covered under Notice 2022-36 include this imposed pursuant to the following sections of the Internal Revenue Code:

  • Section 6651(a)(1)
  • Section 6038
  • Section 6038A(d)
  • Section 6038C(c)
  • Section 6039F(c)
  • Section 6677
  • Section 6698(a)(1)
  • Section 6699(a)(1)
  • Section 6721(a)(2)(A)

Tax returns that are eligible for penalty relief under Notice 2022-36 include:

  • Forms 1040, 1040-C, 1040-NR, 1040-NR-EZ, 1040 (PR), 1040-SR
  • Forms 1041, 1041-N and 1041-QFT
  • Forms 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC and 1120-SF
  • Form 1066
  • Forms 990-PF and 990-T
  • Forms 3520 and 3520-A
  • Forms 5471 and 5472

The IRS is also offering relief from penalties imposed for failure to include all required information on Form 1065, U.S. Return of Partnership Income, and Form 1120-S, U.S. Income Tax Return for an S Corporation.

Exceptions to Automatic Penalty Relief Under IRS Notice 2022-36

While the penalty relief offered under IRS Notice 2022-36 applies to penalties typically applied in the ordinary course due to delinquent filings, it does not apply to penalties imposed in other circumstances. For example, taxpayers will remain liable for penalties including those imposed:

  • For fraudulent failure to file under Section 6651(f)
  • Pursuant to an offer in compromise under Section 7122
  • Pursuant to a settlement agreement under Section 7121
  • As a result of final determinations in judicial proceedings

Other Penalty Relief Options Remain Available

While the penalty relief offered under IRS Notice 2022-36 is limited in both time and scope, other forms of penalty relief remain available. If you (or your business) owe penalties to the IRS that are not covered under Notice 2022-36, you should consult with a tax lawyer regarding the options you may have for reducing or eliminating your federal tax penalty liability.

Request an Appointment with Tax Lawyer Kevin E. Thorn

If you would like to know more about applying for penalty relief with the IRS, we encourage you to schedule a confidential consultation at Thorn Law Group. To request an appointment with tax lawyer and Managing Partner Kevin E. Thorn, please call 202-349-4033, email or contact us confidentially online today.

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