Internal Revenue Service Penalty Relief For 2019 And 2020 Late Filed Tax Returns And Information Returns – Tax Authorities

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The Internal Revenue Service (IRS) issued an Administrative
Notice on August 24, 2022, providing for penalty relief for late
filed tax returns and late filed information returns for the
taxable years 2019 and 2020. To qualify for the penalty relief, the
taxpayers must submit any eligible tax return for these years on or
before September 30, 2022. Relief from information return penalties
for 2019 or 2020 will only be granted if the returns were filed
before August 1, 2020, or August 1, 2021, respectively.

The IRS stated in its Notice that it will pay most of the
refunds or apply credits with regard to late filed penalties that
have already been assessed and paid without the need for filing a
claim for the credit or refund. As a cautionary measure, taxpayers
may prefer to submit claims for penalty relief in order to ensure
that the penalties will be abated and any penalties that have been
paid are refunded in a timely manner.

The announced penalty relief is intended to help struggling
taxpayers affected by the COVID-19 pandemic. It will also allow the
IRS to focus its resources on processing backlogged tax returns and
taxpayer correspondence to help return IRS operations to normal for
the 2023 filing season. The Treasury Department and the IRS have
determined that the penalty relief will allow the IRS to focus its
resources more effectively.

The penalty relief for 2019 and 2020 covers additions to tax
under IRC §6651(a)(1) for failure to file the following income
tax returns:

  • Form 1040 US Individual Income Tax Returns;

  • Form 1041 US Income Tax Return for Estates and Trusts;

  • Form 1120 US Corporate Income Tax Returns;

  • Form 1066 US Real Estate Mortgage Investment Conduit Income Tax

  • Form 990-PF Returns for Private Foundations or Section 4947(1)
    Trusts Treated as Private Foundations; and

  • Form 990-T Exempt Organization Business Income Tax

In addition to penalty relief regarding the above-referenced
federal income tax returns, the Notice provides that certain
penalties under IRC Sections 6038, 6038A, 6038C, 6039F, 6677, 6698,
6699, and 6721(a)(2)(A) for failure to timely file information
returns are also subject to relief.

Penalties for fraudulent failure to file under Section 6651(f),
or the penalty for fraud under Section 6663, are not eligible for
relief. Similarly, any penalties included in an accepted offer in
compromise, settled in a closing agreement under Section 7221, or
determined in a judicial proceeding are not eligible for

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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