IRS Reminds Taxpayers of Sept. 30 Filing Deadline for COVID Penalty Relief
The IRS is reminding individuals and businesses affected by the COVID-19 pandemic that they may qualify for late-filing penalty relief if they file their 2019 and 2020 returns by Sept. 30, 2022.
The relief, announced last month in Notice 2022-36, applies to the failure-to-file penalty. The penalty is typically assessed at a rate of 5% per month, up to 25% of the unpaid tax, when a federal income tax return is filed late. This relief applies to forms in both the Form 1040 and 1120 series, as well as others listed in the notice. The relief does not apply to 2021 returns.
The IRS stated that those who file during the first few months after the Sept. 30 cutoff will still qualify for partial penalty relief because, for eligible returns filed after that date, the penalty starts accruing on Oct. 1, 2022, rather than the return's original due date.
Unlike the failure-to-file penalty, the failure-to-pay penalty and interest will still apply to unpaid tax based on the return's original due date. The failure-to-pay penalty is normally 0.5% per month. The interest rate is currently 5% per year, compounded daily, but that rate is due to rise to 6% on Oct. 1, 2022.
The notice also provides details on relief for filers of certain international information returns when a penalty is assessed at the time of filing. No relief is available for applicable international information returns when the penalty is part of an examination.
Eligible taxpayers who have already filed their returns do not need to apply for the relief as it is automatic. Generally, those who have already paid the penalty are getting refunds, most by the end of September.
Penalty relief is not available in some situations, such as where a fraudulent return was filed, where the penalties are part of an accepted offer in compromise or a closing agreement, or where the penalties were finally determined by a court. Relief is limited to the penalties the notice specifically states are eligible for relief. For ineligible penalties, such as the failure-to-pay penalty, taxpayers may use existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First-Time Abate program. Visit IRS.gov/penaltyrelief for details.
Besides providing relief to both individuals and businesses impacted by the pandemic, the IRS said this step is designed to allow the agency to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season.