New IRS Penalty Relief For Certain Late Filing Penalties

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In short: The IRS is offering automatic penalty relief for 2019 and 2020 on certain late filing penalties

 On August 24, 2022, the IRS issued Notice 2022-36 stating that it would begin offering penalty relief for certain late filing penalties and certain failure to file information return penalties for tax years 2019 and 2020.

What Action Does A Taxpayer Need to Take to Receive the New Penalty Relief Under IRS Notice 2022-36?

 Nothing! If a taxpayer is eligible for the new penalty relief, the IRS will automatically abate the penalty and refund the penalty if previously paid. However, the deadline to file to receive penalty relief for late-filed 2019 and 2020 returns is September 30, 2022. Therefore, if a taxpayer has a 2019 or 2020 penalty covered under this IRS relief provision and has not yet filed the applicable return, the taxpayer must file before September 30, 2022 to qualify. This September 30 deadline doesn’t pertain to late filed information returns.

Who Is Eligible for Penalty Relief Under IRS Notice 2022-36?

 The following criteria must be met to qualify for penalty relief from the failure to file (late filing) penalty pertaining to income tax returns.

• The penalty must be assessed on either a 2019- or 2020-income tax return
• The 2019- or 2020-income tax return must be filed before September 30, 2022.

This IRS penalty relief pertains to late filing penalties for:

• Individuals, C Corporations, Trusts, and Estates – Forms 1040, 1120, and 1041.
• International Disclosures – Forms 5471,5472, 3520, or 3520A that are filed with a tax return
• Partnerships – Form 1065
• S-Corporations – Form 1120-S

 Information Returns: Limited Relief for Late-Field Forms 1095, 1099 and Others

 In addition to offering penalty relief for a failure to timely file income tax returns and related disclosures, the IRS is also granting penalty relief for certain information penalties for late-filed Forms 1095, 1099, etc. for tax years 2019 and 2020.

To qualify for penalty relief due to failure to timely file an information return, a taxpayer must meet the following requirements:

• The penalty must be assessed for either the 2019 or 2020 reporting periods.
• The information returns must have been filed prior to August 1 of the applicable reporting year as follows:
  • For 2019 information returns, the returns must have been filed on or before August 1, 2020.
  • For 2020 information returns, the returns must have been filed on or before August 1, 2021.

What Other Relief Provisions Exist for Taxpayers?

Even if a taxpayer does not meet the eligibility requirements for penalty relief under this notice, our team can help an eligible client seek penalty relief under existing penalty relief procedures such as reasonable cause criteria or the First Time Abatement (FTA) program.

We’re Here to Help

Bennet Thrasher’s Tax Controversy team has vast experience in navigating how best to respond to IRS penalty notices.  For more information on our Tax Controversy services, please contact James Pickett, Director of our Tax Controversy practice, by emailing [email protected].

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