IRS provides penalty relief for 2019 and 2020 late returns

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

Relief applies to income tax returns in both the Form 1040 and Form 1120 series as well as to Form 1041 and Form 1065. For S corporation and partnership returns, relief also applies to penalties for failure to show required information on the return.

To qualify for this relief, the eligible income tax return must be filed on or before September 30, 2022. If a taxpayer has not yet filed for tax year 2019 or 2020, the taxpayer should take immediate action to do so. However, refunds will be automatic for taxpayers who previously filed and paid penalties eligible for relief.

The relief also applies to filers of various international information returns, such as those reporting transactions with foreign trusts, receipt of foreign gifts, and ownership interests in foreign corporations. To qualify for this relief, any eligible tax return must be filed on or before September 30, 2022.

The IRS is also providing penalty relief to employers and businesses required to file various information returns with the IRS, such as Form W-2 and forms in the 1099 series, including Form 1099-NEC, 1099-MISC, and 1099-K. To qualify for this relief:

  • the elegible 2019 information return must have been filed by August 1, 2020, and
  • the eligible 2020 information return must have been filed by August 1, 2021.

Since both dates fell on weekends, 2019 and 2020 returns will be considered timely if they were filed on August 3, 2020, and August 2, 2021, respectively.

Exceptions to late filing relief

Relief does not apply to penalties not mentioned in this notice, including the failure to pay penalty. However, taxpayers may be eligible for relief under other procedures, such as first-time abatement and reasonable cause. In any case, penalty relief is not available where penalties for fraud have been assessed, or where the penalties are part of an accepted offer in compromise or closing agreement, or where penalties were determined by a court.

If you have any IRS tax matters to resolve, contact www.blancamaldonado to schedule an appointment.