The Internal Revenue Service (IRS) has released Notice 2022-36, which provides penalty relief for certain taxpayers (as well as certain domestic and international information return filers) who missed filing deadlines for their 2019 and 2020 tax returns. For those who qualify, any outstanding tax returns from 2019 and 2020 must be filed by Sept. 30, 2022, and the relief payment will come in the form of a refund or tax credit by the end of September. The penalty for failure to file is generally five percent per month and up to 25 percent of the unpaid tax instances when the federal income tax return is not filed on time.
Banks, employers and other businesses required to file information returns will also have the opportunity to take advantage of the penalty relief if their 2019 return was filed by Aug. 3, 2020, and their 2020 return was filed by Aug. 2, 2021.
The following returns are eligible:
- Individual income tax returns
- Estate and trust income tax returns
- Business income tax returns
- Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return
- Exempt organization income tax returns
- U.S. Income Tax Return for an S Corporation
- Form 1065, U.S. Return of Partnership Income
The IRS estimates that nearly 1.6 million taxpayers will receive the penalty relief automatically by the end of September 2022. Penalty relief is automatic; there is no action needed from taxpayers. Therefore, if you have already received a notice for the late file penalty, it will be abated. If you have already made payment, it will be refunded or credited to your account.
The penalty relief is not available for any taxpayers who have filed a fraudulent return, accepted an offer-in-compromise that included penalties, entered into closing agreement with the IRS regarding their 2019 or 2020 return or had court-determined penalties. This penalty relief does not apply to failure to pay penalties; however, taxpayers still have the opportunity to pursue First-Time Abatement or reasonable cause relief.
For more information about how the penalty relief impacts your tax situation, please contact your Windham Brannon advisor or reach out to Tomika Bullet.
