According to a release by the IRS Wednesday, a broad range of information and tax returns for 2019 and 2020 tax years will receive automatic relief from failure-to-file penalties under Notice 2022-36. The estimated 1.6 million taxpayers who have already paid these penalties will automatically receive an estimated total of $1.2 billion in refunds or credits. Abatement of the penalties is also automatic. Therefore, taxpayers do not need to request this relief. The IRS said in the notice and announced in a news release it will pay most of the refunds or apply credits by the end of next month.
However, any return still unfiled for the two tax years must be filed by Sept. 30, 2022, to be eligible for the relief.
The notice also abates penalties for failure to timely file any information return (as defined in Sec. 6724(d)(1)), such as those in the Form 1099 series, for the two tax years. To be eligible, information returns for 2019 must have been filed on or before Aug. 3, 2020, and 2020 information returns by Aug. 2, 2021. In addition, various international information returns such as those reporting transactions with foreign trusts, receipt of foreign gifts, and ownership interests in foreign corporations will receive similar relief.
However, to qualify for the relief, any eligible tax return must be filed on or before Sept. 30, 2022.
The IRS said in the release that the relief measure is intended “to help struggling taxpayers affected by the COVID-19 pandemic” and to allow the Service to “focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season.” The IRS acknowledged in the notice another reason for the relief is that additions to tax or penalties for failure to timely file returns continued to accrue during periods of postponed filing dates for returns for both years, under the presidential emergency declaration in March 2020 in response to the pandemic.