The IRS is providing penalty relief to certain taxpayers who filed their 2019 and/or 2020 tax returns late. The penalty relief also extends to certain domestic and international information return filers.
Who qualifies for relief? For income tax filers to qualify for this penalty relief, any “eligible income tax return” must be filed on or before September 30, 2022.
Note. For those with an outstanding 2019 or 2020 income tax return, if they file it before September 30, 2022, they won’t have to pay the failure-to-file penalty.
For banks, employers, and other businesses required to file information returns, such as those in the 1099 series, a 2019 return will be considered timely if it was filed by August 3, 2020, and a 2020 return will be considered timely if it was filed by August 2, 2021.
Note. The notice provides details on penalty 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. To qualify for this relief, any eligible tax return must be filed on or before September 30, 2022.
Which returns are eligible for penalty relief? Eligible tax returns include:
- Individual income tax returns: Form 1040, U.S. Individual Income Tax Return; Form 1040-C, U.S. Departing Alien Income Tax Return; Form 1040-NR, U.S. Nonresident Alien Income Tax Return; Form 1040-NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents; Form 1040 (PR), Federal Self-Employment Contribution Statement for Residents of Puerto Rico; Form 1040-SR, U.S. Tax Return for Seniors; and Form 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico);
- Estate and trust income tax returns: Form 1041, U.S. Income Tax Return for Estates and Trusts; Form 1041-N, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts; and Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts;
- Business income tax returns: Form 1120, U.S. Corporation Income Tax Return; Form 1120-C, U.S. Income Tax Return for Cooperative Associations; Form 1120-F, U.S. Income Tax Return of a Foreign Corporation; Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation; Form 1120-H, U.S. Income Tax Return for Homeowners Associations; Form 1120-L, U.S. Life Insurance Company Income Tax Return; Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons; Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return; Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations; Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts; Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies; and Form 1120- SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B);
- Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return; and
- Exempt organization income tax returns, including Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation; and Form 990-T, Exempt Organization Business Income Tax Return (and Proxy Tax Under Section 6033(e)).
- U.S. Income Tax Return for an S corporation and Form 1065, U.S. Return of Partnership Income.
Penalty relief is automatic. Eligible return filers don’t need to apply for this relief. If the IRS has already assessed a late-filing penalty, it will be abated. If a filer has already paid a late-filing penalty, the filer will receive a credit or refund.
Note. According to the IRS, nearly 1.6 million taxpayers will automatically receive penalty refunds or credits. Many of these payments will be completed by the end of September 2022, the IRS said.
Who doesn’t qualify for penalty relief? Penalty relief isn’t available to taxpayers who 1) filed a fraudulent return, 2) accepted an offer-in-compromise that included penalties, 3) entered into a closing agreement with the IRS for an otherwise eligible 2019 or 2020 return, or 4) had penalties finally determined by a court.
This relief is limited to the penalties that Notice 2022-36 specifies as eligible for relief. Other penalties, such as the failure-to-pay penalty, aren’t eligible. However, taxpayers may use existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First-Time Abatement program, for any ineligible penalties.
For more information on blanket extensions of time to file granted for specific years or periods, see Checkpoint’s Federal Tax Coordinator ¶ S-5063.
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