If You Haven’t Filed Your 2019 and/or 2020 Tax Returns, You Have One Month to Do So and Avoid Late Filing Penalties

Earlier today, the IRS announced extremely broad penalty relief for 2019 and 2020 late-filed tax returns.  Here’s the beginning of the IRS’s press release:

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

The IRS 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 be completed by the end of September.

Besides providing relief to both individuals and businesses impacted by the pandemic, this step is designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season.

“Throughout the pandemic, the IRS has worked hard to support the nation and provide relief to people in many different ways,” said IRS Commissioner Chuck Rettig. “The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time. This penalty relief will be automatic for people or businesses who qualify; there’s no need to call.”

The relief applies to the failure to file penalty. The penalty is typically assessed at a rate of 5% per month and up to 25% of the unpaid tax when a federal income tax return is filed late. This relief applies to forms in both the Form 1040 and 1120 series, as well as others listed in Notice 2022-36, posted today on IRS.gov.

The returns impacted by this include:

  • Form 1040 (Individual Income Tax Returns)
  • Form 1041 (Trust/Estate Tax Returns)
  • Form 1120 (C-Corporation Tax Returns)
  • Form 1120-S (S-Corporation Tax Returns)
  • Form 1065 (Partnership Tax Returns)
  • Some foreign information returns, such as Forms 5471 and 3520

Let’s say you haven’t filed your 2020 tax return.  You’re being given a golden opportunity to avoid a 25% penalty.  You will still owe the late payment penalty (0.5% of the tax due per month late) and interest, but these pale in comparison to the late filing penalty.  If I were an impacted taxpayer, I would immediately contact a tax professional to get the return filed!  Most tax professionals are extremely busy (especially with the extension deadlines approaching), but things will only be worse in two weeks.

If you did file one of these returns and late and were assessed a penalty, you should receive your refund by the end of September.

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