Home / Articles / IRS Offers Penalty Relief for 2019, 2020 Tax Years

IRS Offers Penalty Relief for 2019, 2020 Tax Years

September 13, 2022

Share:

While the recently announced student loan debt relief has captured numerous headlines, it’s estimated that another federal relief program announced on the same day will provide more than $1.2 billion in tax refunds or credits. Specifically, IRS Notice 2022-36 extends penalty relief to both individuals and businesses who missed the filing deadlines for certain 2019 and/or 2020 tax and information returns. The relief covers many of the most commonly filed forms.

Broad relief for late taxpayers

The intent behind the penalty relief is two-fold: 1) to help taxpayers negatively affected by the Covid-19 pandemic, and 2) to allow the IRS to focus on processing backlogged tax returns and taxpayer correspondence. As recently as late May 2022, the IRS had a backlog of more than 21 million unprocessed paper returns. The goal is for the IRS to return to normal operations for the 2023 filing season.

To that end, the notice provides relief from 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. To qualify for the relief, an income tax return must be filed on or before Sept. 30, 2022.

Banks, employers and other businesses that are required to file various information returns (e.g., the Form 1099 series) also may qualify for relief. Eligible 2019 returns must have been filed by Aug. 3, 2020, and eligible 2020 returns must have been filed by Aug. 2, 2021.

Potentially eligible forms include:

  • Form 1040, U.S. Individual Income Tax Return, and other forms in the Form 1040 series
  • Form 1041, U.S. Income Tax Return for Estates and Trusts, and other forms in the Form 1041 series
  • Form 1065, U.S. Return of Partnership Income
  • Returns filed in the Form 1120 series including:
    • Form 1120, U.S. Corporation Income Tax Return
    • Form 1120-C, U.S. Income Tax Return for Cooperative Associations
    • Form 1120-F, U.S. Income Tax Return of a Foreign Corporation
    • Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation
    • Form 1120-H, U.S. Income Tax Return for Homeowners Associations
    • Form 1120-L, U.S. Life Insurance Company Income Tax Return
    • Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons
    • Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return
    • Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations
    • Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts
    • Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies
    • Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B)
    • Form 1120-S, U.S. Income Tax Return for an S Corporation
  • Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return
  • Forms concerning exempt organizations
  • Certain international information returns

Notably, the relief doesn’t extend to failure-to-file penalties for Form 8938, Statement of Specified Foreign Financial Assets, or FinCEN Report 114, Report of Foreign Bank and Financial Accounts.

Exceptions to the rule

Some other exceptions apply. Penalty relief isn’t available if:

  • A fraudulent return was filed,
  • The penalty was part of an accepted offer-in-compromise or a closing agreement with the IRS, or
  • The penalty was finally determined by a court.

In addition, the IRS isn’t providing relief for the failure-to-pay penalty or other penalties. Such ineligible penalties may, however, qualify for previously existing penalty relief procedures, including the reasonable cause defense or the IRS’s First Time Abatement Program.

No action required

The penalty relief is automatic. If you qualify, you do not need to apply for it or reach out to the IRS in any way. Penalties that have already been assessed will be abated. If you’ve already paid a covered penalty, the IRS says, you should receive a refund or credit by Sept. 30, 2022. Please reach out to CSH’s Tax department with questions and/or assistance around IRS Notice 2022-36.     

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

Guidance

Related Articles

Article

2 Min Read

The Inflation Reduction Act Includes Wide-Ranging Tax Provisions

Article

2 Min Read

CHIPS Act Poised to Boost U.S. Businesses

Article

2 Min Read

Ohio Tax Update: HB 515 Sale of a business may qualify for Ohio Business Income Deduction treatment

Article

2 Min Read

Ohio Bill May Provide Tax Relief to Small Business Owners

Article

2 Min Read

Standard business mileage rate will increase for the second half of 2022

Article

2 Min Read

Proposed regulations for inherited IRAs bring unwelcome surprises

Get in Touch.

What service are you looking for? We'll match you with an experienced advisor, who will help you find an effective and sustainable solution.
  • Hidden
  • This field is for validation purposes and should be left unchanged.