IRS Offers Dramatic Penalty Relief – Income Tax

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On August 24, 2022, the IRS issued Notice 2022-36 providing automatic relief from failure to file penalties for the 2019 and 2020 tax years for a significant number of individuals and businesses who filed their returns. overdue 2019-20 revenue.

Relief is provided for non-filing penalties generally applied to late returns on certain forms, if filed before September 30, including:

  • Form 1040 series (personal income tax)

  • Series of Forms 1041 (Estates and Trusts)

  • Form 1120 series (corporations)

  • Form 1065 Series (Partnerships)

  • Forms 990-T (unrelated business income tax) and 990-PF (excise tax payments on investment income for exempt organizations)

  • Certain international information returns such as Forms 5471 and 5472 for controlled foreign corporations and 25% foreign-owned U.S. corporations, attached to a late-filed Form 1120 or 1065

  • Forms 3520 and 3520-A for reporting transactions with foreign trusts

Relief is automatic

Eligible taxpayers automatically benefit from the penalty reduction and no action is required by or on behalf of affected taxpayers. Taxpayers who have already paid the applicable penalty will be refunded or credited that amount without needing to seek such action.

The IRS is expected to begin sending boilerplate notices within the next three months to taxpayers who will receive a refund or credit.

Filing penalties waived for Forms 1099 and W-2 if filed before August 1, 2020 and 2021

Certain penalties for late filing of information returns, such as Forms 1099 and W-2 for the 2019 and 2020 tax years, are also waived if filed before August 1, 2020 and August 1, 2021, respectively.

Relief not provided for other penalties or other forms

Some forms are conspicuously missing from the list of penalty waiver forms, such as:

  • Forms 990 and 990-EZ annual returns for tax-exempt organizations

  • Forms 706 and 709 for inheritance and gift tax

  • Form 8856 for foreign partnerships

Also, relief does not apply to other penalties, such as default or estimated tax penalties.

Any fraudulently filed return is excluded from the relief granted by Notice 2022-36, as well as any penalty accepted in an offer of compromise entered into with the IRS.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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