During the height of the epidemic, taxpayers encountered a variety of difficulties in submitting their 2019 and 2020 tax returns on time. My dear friend, Ann Lee, CPA, sent us some great insider news that I wanted to share.
If you or your clients failed to file your 2019 or 2020 tax return on time, you may be relieved to know that the IRS automatically is providing penalty relief. This administrative relief applies to both individual and business taxpayers.
What is Failure-to-File Penalties
Under the Internal Revenue Code, Section 6651(a)(1), a penalty is levied on returns that are submitted after the due date or extended due date. The penalty generally amounts to 5% of the tax due for each month that the return is late, with a maximum of 25%.
The US Internal Revenue Service (IRS) recently disclosed Notice 2022-36, in which the IRS announced that it would waive penalties for failing to file tax returns on time for the 2019 and 2020 tax years.
The IRS’s penalty relief program for late filing will begin on Aug. 25, 2022 and continue through Sept. 30, 2022. Got any clients with a plan to catch up on filing several years? This is an opportunity with a deadline.
Taxpayers that have yet to submit their 2019 or 2020 federal income tax returns should do so as soon as possible, and they strongly advise them to file electronically. The late-filing penalty relief for tax years 2019 and 2020 will only apply to tax returns filed by Sept. 30, 2022.
Taxpayers who have already submitted their tax forms are not required to take any additional steps; the relief will be provided automatically. This relief applies not only to the balance due on Form 1040 individual returns, but also to a Form 1120 (C-Corporation) balance due and the per-K1 penalties assessed on Form 1065 (Partnership) and 1120-S (S-Corporation) returns.
Refund for Paid Penalties
If you have already paid the late filing penalty, the IRS will refund any overpayments. The refund will first be used to offset any other liabilities you may have, and the balance will be refunded to you.
Notices and refunds are already being processed, and many of the refunds will be completed by September’s end. Some penalties that had to be filed manually, like those associated with Forms 3520 and 3520-A, will take a bit longer to go through.
So if you or your client haven’t filed your 2019 or 2020 tax return yet, now is the time.
Liz Scott is a multi-business entrepreneur working to bring together technology and accountants through her business, Liz Scott Consulting. A member of Intuit Trainer/Writer Network, she authored and taught Master level courses, including Advisory Guides and Consulting Tools for Accountants. In addition to Liz Scott Consulting, she also owns Accounting Lifeline, a firm to serve small businesses with their financial needs. Liz is a co-host of the “Appy Hour,” which helps other accountants learn about the different tools and apps for small business needs. Holding a high passion for real estate investment, she owns properties throughout Oklahoma.
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