The IRS has announced it will provide penalty relief to most people and businesses who file certain 2019 and 2020 returns late. Nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in refunds or credits.
The relief applies to the failure to file penalty, typically assessed at a rate of 5% per month and up to 25% of the unpaid tax when a federal income tax return is filed late. To qualify for this relief, any eligible income tax return must be filed on or before September 30, 2022.
In addition, the IRS is providing penalty relief to banks, employers and other businesses required to file Forms 1099 and certain other information. To qualify for relief, eligible 2019 returns must have been filed by August 1, 2020, and eligible 2020 returns must have been filed by August 1, 2021.
The IRS also provided details on relief for filers of various international information returns, such as those reporting transactions with foreign trusts, receipt of foreign gifts, and ownership interests in foreign corporations. Of particular interest given WBL's deep involvement with international clients, the penalty relief is extended to late filing of 2019 and 2020 Forms 5471 and 5472. To qualify for this relief, any eligible tax returns must be filed on or before September 30, 2022.
It is important to note that penalty relief is not available for many other types of penalties, including late payment of tax or underpayment of estimated taxes.
For those eligible penalties, relief is automatic. Taxpayers need not apply for it. If already assessed, penalties will be abated. If already paid, the taxpayer will receive a credit or refund.
If you have questions about this or other tax questions, please contact your WBL tax advisor.