On Tuesday, the Internal Revenue Service (IRS) declared a major step to help individuals, businesses, and tax-exempt organizations that are indebted for taxes in 2020 and 2021.
The agency announced waiving $1 billion worth of penalty fees related to these back taxes. The IRS noted that roughly 4.7 million people were impacted by this failure-to-pay penalty relief.
This decision was made due to collection reminders being suspended during the COVID-19 lockdown period; although notices ceased, penalties for failing to pay continued accumulating.
The IRS noted that most relief recipients make under $400,000 annually.
“As a first step, the IRS has adjusted eligible individual accounts and will follow with adjustments to business accounts in late December to early January, and then trusts, estates and tax-exempt organizations in late February to early March 2024. Nearly 70 percent of the individual taxpayers receiving penalty relief have income under $100,000 per year,” the agency’s press release explained.
Eligible taxpayers must have filed a Form 1040, 1041, 1120 series or Form 990-T tax return for either 2020 or 2021, owe less than $100,000 and received an initial collection notice between February 5th 2022 and December 7th 2022.
“The failure-to-pay penalty will resume on April 1, 2024, for taxpayers eligible for relief,” the IRS noted.
Taxpayers, businesses, and nonprofit organizations that qualify will automatically be granted penalty relief; no further action is necessary. Individuals who are eligible and have already paid the penalties will receive a refund of the total amount.
Werfel stated, “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.”
“We are taking other steps to help taxpayers with past-due bills, and we have options to help people struggling to pay,” Werfel added.
The Wall Street Journal reported that as of 2022, approximately 18.6 million taxpayers owed the Internal Revenue Service (IRS) a total of $316 billion in back taxes.
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