IRS Offers Penalty Relief for Certain Qualifying Taxpayers by Arthur Dichter, JD, LLM
Posted on August 30, 2022
by
Arthur Dichter
The IRS recently announced it will provide retroactive penalty relief to taxpayers that failed to file certain tax and information returns on time during the COVID pandemic. To receive this automatic waiver of penalties, domestic and international individuals, businesses, and trusts and estates must file an applicable income tax return on or before Sept. 30, 2022.
The penalty relief provided in IRS Notice 2022-36 is available solely to those taxpayers whose failure to timely file applicable returns for tax years 2019 and 2020 was neither intentional nor fraudulent. Typically, the IRS imposes on reticent taxpayers a monthly failure to file penalty equal to 5 percent of the amount of tax due, up to a maximum penalty of 25 percent of any unpaid tax balance. While late fling penalties will not be applicable, late payment penalties and interest will still apply.
Taxpayers qualifying for this relief include those with the following 2019 and 2020 income tax and information return filing responsibilities:
- Individual Income Tax Return (Form 1040, Form 1040-SR and Form 1040-SS)
- Departing Alien Income Tax Return (Form 1040-C)
- Nonresident Alien Income Tax Returns (Forms 1040-NR and 1040-NR-EZ)
- Federal Self-Employment Contribution Statement for Residents of Puerto Rico (Form 1040-PR)
- Income Tax Return for Estate and Trusts (Form 1041)
- Return of Partnership Income (Form 1065)
- Income Tax Return for an S Corporation (Form 1120-S)
- Corporation Income Tax Return (Form 1120)
- Income Tax Return of a Foreign Corporation (Form 1120-F)
- Income Tax Return of a Foreign Sales Corporation (Form 1120-FSC)
- Income tax returns for homeowners’ associations (Form 1120-H), real estate investment trusts (REITs) (Form 1120-REIT), regulated investment companies (RICs) (Form 1120-RIC), life insurance companies (Form 1120-L), property and casualty insurance companies (Form 1120-PC), certain political organizations (Form 1120-POL)
- Returns of Private Foundations and Trusts Treated as Private Foundation (Form 990-PF)
- Returns of Exempt Organizations Business Income Tax Return (Form 990-T)
- Information Return of Certain U.S. Persons With Respect to Certain Foreign Corporations (Form 5471) if attached to a Form 1120 or Form 1065
- Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business (Form 5472) if attached to a Form 1120 or Form 1065
- Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts (Form 3520) and Annual Information Return of Foreign Trust with a U.S. Owner (Form 3520-A)
Additional penalty relief is available to business taxpayers that filed 2019 Form 1099 informational series returns by Aug. 1, 2020, and 2020 information returns by Aug. 1, 2021.
Taxpayers that file relevant 2019 and 2020 returns on or before Sept. 30, 2022, do not have to request relief from the IRS. Rather, the IRS will automatically waive relevant penalties and/or refund to taxpayers penalties previously assessed. All told, the IRS expects to issue more than $1.2 billion in refunds to nearly 1.6 million taxpayers that already paid failure to file penalties.
While the extension of time to file these returns is welcome news, taxpayers should not wait until the last moment to meet these extended deadlines. Taxpayers who need to file delinquent income tax or information returns for 2019 or 2020 should consult with their tax advisors immediately.
About the Author: Arthur Dichter, JD, is the director-in-charge of the International Tax Services practice with Berkowitz Pollack Brant Advisors + CPAs, where he works with multi-national businesses, foreign trusts, and high-net worth foreign individuals to structure their assets and build wealth in compliance with U.S. income, estate and gift tax laws. He can be reached at the firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.
← Previous
