IRS Penalty Relief for Tax Years 2019 and 2020
August 25, 2022
On August 24, 2022, the IRS released Notice 2022-36 which provides penalty relief from certain failure to file penalties and international information return penalties with respect to 2019 and 2020 tax returns filed before September 30, 2022.
The IRS is granting this penalty relief to reduce its backlog with the aim of going into the 2023 filing season at normal operating levels.
For tax years 2019 and 2020 where the returns were filed before September 30, 2022, the IRS will not impose the following penalties:
- Penalties imposed under IRC §6651(a) for failure to file a tax return with relief applying to:
- Individual income tax returns (Form 1040)
- Fiduciary income tax returns (Form 1041)
- C-Corporation income tax returns (Form 1120)
- Exempt organization income tax returns (Form 990)
- Penalties imposed under IRC §6698(a)(1) for failure to timely file a return and penalties imposed under IRC §6698(a)(2) for failure to show the required information for:
- Partnership income tax returns (Form 1065)
- Penalties imposed under IRC §6699(a)(1) for failure to timely file a return and penalties imposed under IRC §6699(a)(2) for failure to show the required information for:
- S-Corporation income tax returns (Form 1120-S)
- Penalties imposed under IRC §6038, §6038A, §6038C, §6039F and §6677 for failure to timely file international information returns including:
- Form 5471
- Form 5472
- Form 3520
- From 3520-A
For tax years 2019 and 2020 where the returns were filed before the following deadlines:
- 2019 returns filed on or before August 1, 2020
- 2020 returns filed on or before August 1, 2021
The IRS will not impose the following penalties under:
- IRC §6721(a)(2)(A) failure to timely file information returns (W-2s, and 1099s)
- IRC §6724(d)(1) reporting amounts paid for various items of income (wages, dividends, interest, royalties, etc.)
No penalty relief will be provided for:
- Any penalties not specifically listed in the notice.
- Penalties imposed under IRC §6651(f) due to fraudulent failure to file or the penalty assessed under IRC §6663 for fraud.
- Penalties in an accepted offer in compromise imposed under IRC §7122.
- Penalties imposed under IRC §7121 as settled in a closing agreement or finally determined in a judicial proceeding.
To the extent that penalties were previously assessed for these tax years, they will automatically be waived, abated and if applicable, refunded or credited to the taxpayer’s account without any action needed from the taxpayer.
The method for how refunds will be issued has not yet been determined but the IRS expects to issue the refunds by the end of September. Taxpayers will most likely receive their refund in the form of a check, delivered by mail. If taxpayers receive a refund from the IRS related to tax year 2019 or 2020, they should inform their tax professional.
We appreciate the opportunity to work with you and are available to answer any questions or concerns you may have.
Gatto, Pope & Walwick, LLP
Certified Public Accountants