Important Announcement for Taxpayers! IRS Provides Penalty Relief to Nearly 5 million Tax Returns for 2020 and 2021

In a significant move to assist those with tax liabilities, the Internal Revenue Service (IRS) announced today new penalty relief for approximately 4.7 million individuals, businesses, and non-profit organizations that did not receive automatic reminders during the pandemic. 

The IRS will offer around $1 billion in penalty relief, benefiting primarily those with annual incomes below $400,000. Due to the unprecedented effects of the COVID-19 pandemic, the IRS temporarily suspended the sending of automatic reminders for overdue taxes starting from February 2022. Although these notices were suspended, the penalty for non-payment continued to accrue for those who did not fully pay in response to the initial outstanding balance notice. 

As part of the strategy to resume normal collection notifications for the fiscal years 2020 and 2021, the IRS will issue a special reminder letter next month. This letter will alert the taxpayer to their responsibility, simple payment methods, and the amount of penalty relief, if applicable. 

Penalty relief is automatic and applies to eligible taxpayers without any action required on their part. Those who have already paid the full balance will also benefit, as the IRS will issue a refund or credit the payment toward another outstanding tax obligation. 

Penalty relief only applies to eligible taxpayers with assessed taxes of less than $100,000 for the fiscal years 2020 and 2021. This relief represents an estimated savings of $1 billion for taxpayers, approximately $206 per filing. 

The penalty for non-payment will resume on April 1, 2024, for eligible relief recipients. Those not eligible have options, such as applying for relief under reasonable cause criteria or the First-Time Abate program. Taxpayers are encouraged to visit IRS.gov/penaltyrelief for more details. 

Stay informed and prepared for the changes coming in 2024! The IRS will resume automatic collection notifications starting in January, sending letters to individuals with tax debts before the fiscal year 2022 and to businesses, non-profit organizations, and trusts with tax debts before 2023. 

Remember, there are online options and tools available to assist with unpaid tax debts. The IRS is here to help! 

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