If you missed the deadline for 2019 or 2020 tax returns, you may receive a refund for late-filing penalties. But you must file late returns by September 30 to qualify.
The IRS will disburse more than $1.2 billion in group refunds or credits to nearly 1.6 million late filers, according to the federal agency.
Many individuals and small businesses will receive automatic payments by the end of September, the IRS said.
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“Throughout the pandemic, the IRS has worked hard to support the nation and bring relief to people in various ways,” said IRS Commissioner Chuck Rettig.
The waiver applies to the agency’s late filing penalty of 5% of your outstanding balance per month, capped at 25%. Late payment penalties of 0.5% per month may still apply.
Eligible tax returns include individuals, corporations, estates and trusts, etc., according to an IRS notice.
IRS penalty relief ‘very welcome’, tax experts say
The announcement comes as the IRS faces continued criticism for a backlog of unprocessed tax returns, despite Rettig’s promises that the pileup will “absolutely” be resolved by December.
As of Aug. 26, there were 8.2 million unprocessed individual returns filed in 2022, according to the IRS, including 6.5 million paper returns.
This relief is “very welcome,” said Albert Campo, CPA and president of AJC Accounting Services in Manalapan, New Jersey.
Covid-19 has “significantly impacted” the agency’s ability to process paper, Campo said, and missing returns have triggered notices, further adding to the pile-up when filers respond.
“With this broad relief, the burden on taxpayers, tax practitioners and IRS staff should be alleviated to some extent,” he said.
The IRS has been “working aggressively” to process pending returns and correspondence from taxpayers, with the goal of returning to “normal operations” for the 2023 filing season, according to the notice. The penalty relief will allow the agency to “focus its resources more effectively,” the IRS said.