The IRS has announced new penalty relief to assist approximately 4.7 million individuals, businesses, and charitable organizations. This is a major step to assist those who owe back taxes but were never sent automated collection reminders during the pandemic. In total, the IRS will waive nearly $1 billion in penalty fees and interest. The majority of those receiving this tax relief earn less than $400,000 a year.
Temporary Suspension of Collection Letters
Beginning in February 2022, the IRS temporarily suspended collection letters which were sent by mail to those who owed a balance. These notices would typically be issued as a follow-up after a taxpayer receives the initial balance due notice. Although delivery of the letters was suspended, the failure-to-pay penalty fees continued to accrue for those who still owed back taxes.
Now, the IRS is taking steps in advance of resuming normal collection notices for tax years 2020 and 2021 to help those with unpaid tax debt. This includes taxpayers who have not received a notice from the IRS in more than a year.
“As the IRS has been preparing to return to normal collection mailings, we have been concerned about taxpayers who haven’t heard from us in a while suddenly getting a larger tax bill. The IRS should be looking out for taxpayers, and this penalty relief is a common-sense approach to help people in this situation,” said IRS Commissioner Danny Werfel. “We are taking other steps to help taxpayers with past-due bills, and we have options to help people struggling to pay.”
New Penalty Relief Available
To assist taxpayers in getting back on track, the IRS will be sending out special reminder letters starting in January. The letter will explain the taxpayer’s liability, the various options for paying their balance, and the penalty relief amount applied.
The IRS estimates that 5 million tax returns are eligible for the new penalty relief. It will adjust individual taxpayer accounts first, followed by business accounts in late December to early January. Trusts and estates, as well as tax-exempt organizations, should see the relief applied to their accounts in late February to early March.
Taxpayers will not have to submit a form or apply online; the penalty relief is automatically applied. If a taxpayer already paid failure-to-pay penalties related to a 2020 or 2021 tax return, the IRS will issue a refund or credit the payment to any remaining unpaid balance.
Who is Eligible?
The new penalty relief will apply to eligible taxpayers who were assessed $100,000 or less in back taxes. Eligible taxpayers include:
- Those who filed Forms 1040, 1120, 1041, and 990-T income tax returns for tax years 2020 and/or 2021; and
- Issued an initial balance due notice between February 5, 2022, and December 7, 2023; or
- Were actively in the IRS collection notice process.
The $100,000 tax debt limit is applied separately to each return and each entity. On April 1, 2024, the failure-to-file penalty fees will resume for those eligible for relief.
Help For Those Who Don’t Qualify or Still Owe
If you are ineligible for the new penalty relief or still have an outstanding tax balance that you can’t pay, help is available. Call Tax Defense Network at 855-476-6920 to see if you qualify for other penalty abatement and repayment assistance. The consultation is 100% free and there is no obligation to purchase any services. We may be able to reduce or even eliminate your tax debt. Contact us today to see if you qualify for a fresh start!