Notice 2022-36: The IRS Provides Tax Penalty Waiver for Tax Years 2019 and 2020
To provide relief for taxpayers affected by the COVID-19 pandemic, the Treasury Department, and the IRS is offering to waive failure-to-file penalties for certain taxpayers. This applies to tax years 2019 and 2020.
If you have any failure-to-file tax penalties assessed for tax years 2019 or 2020, those penalties will be abated. If you’ve already paid the failure-to-file penalties for either year, you will receive a credit or refund.
To be eligible for this relief, you must file your 2019, and/or 2020 personal or business returns by September 30,2022. If you’ve already filed all required tax forms for those years, you don’t have to do anything further. The penalty relief will be applied automatically.
In the words of IRS Commissioner Chuck Rettig:
“This penalty relief will be automatic for people or businesses who qualify. There’s no need to call.”
Nearly 1.6 million taxpayers who already paid the failure-to-file penalties for 2019, and/or 2020 will be receiving refunds totaling more than $1.2 billion. Most eligible taxpayers will receive their refunds by the end of September 2022.
This waiver was announced in IRS Notice 2022-36 To get a better understanding of how this waiver applies to you, let’s take a closer look at the notice.
Highlights of Notice 2022-36:
- The waiver covers failure-to-file penalties for tax years 2019 and 2020
- The waiver applies to both personal, and certain business returns
- If you have already paid failure-to-file penalties for those years, you will receive a tax credit or refund
- To qualify, you must file 2019 and 2020 personal or businesses returns on or before September 30, 2022
- If you have already filed your tax returns for 2019 and 2020, you don’t have to do anything further to qualify
- The waiver also applies to penalties for informational returns for 2019 and 2020 filed before 8/1/20 and8/1/21, respectively
Am I Eligible for the Notice 2022-36 Penalty Waiver?
If you’re caught up on your tax filing obligations for 2019 and 2020, you are qualified for this waiver. You won’t have to take any further steps to be eligible. It’s automatic.
If you are behind on filing, you must file any delinquent personal or businesses returns for tax years 2019 and 2020 on or before September 30, 2022.
What Penalties Can I Waive?
The tax relief referenced in Notice 2022-36 will waive penalties resulting from failing to file certain tax forms on time.
For example, when a Form 1040 is filed late, a penalty is usually assessed at a rate of 5% per month up to a maximum penalty of 25% of the unpaid tax. This waiver will erase any such penalties accrued from failing to timely file a Form 1040 for tax years 2019, and/or 2020.
In addition to Form 1040 series, this tax relief will cover failure-to-file penalties for a variety of other forms, including:
- Form 1120 series
- Form 1120-S
- Form 1065
- Form 3520
- Form 3520-A
- Form 1041 series
- Form 990-PF
- Form 990-T
- Form 5471 and 5472 attached to a late-filed Form 1120 or Form 1065;
The IRS will also forgo imposing penalties for failing to timely file certain information returns (as defined in section 6724(d)(1) that meets the following criteria:
- 2019 informational returns that were filed on or before August 1, 2020
- 2020 informational returns that were filed on or before August 1, 2021
Note: this tax relief only applies to Failure-To-File penalties. It does not cover other tax penalties, such as failure to pay, penalty for underpayment of estimated tax, Accuracy-Related, Failure to Deposit, etc.
While the penalty relief offered by Notice 2022-36 is broad, there are certain situations when you cannot claim this waiver. Examples include:
- If you filed a fraudulent return
- If the penalties were part of an accepted offer in compromise or a closing agreement
- If the penalties were finally determined by a court
Unanswered Questions from Notice 2022-36
Some aspects of this waiver remain unclear. For example, Notice 2022-36 does not address whether the waiver applies to Forms 5471, 8858, or 8865 when attached to forms 1040, 1041,or 1120-S.
The notice also fails to mention certain forms entirely, such as:
It is unclear whether these forms were omitted intentionally or by accident. For now, taxpayers may have to rely on “reasonable cause” for abatement of their penalties, unless the IRS issues a correction to this notice.
The notice also did not explicitly address situations where these international information returns were not included on a timely filed return such as 1040, 1041, 1120, 1120-S, 1065 etc., and whether those returns can be amended to include an omitted information return.
What Should I Do Next?
If you’ve already filed all required forms for tax years 2019 and 2020, you don’t need to do anything. If you failed to file your 2019 and 2020 returns, you must file those late returns on or before September 30, 2022, to qualify for the waiver.
Of course, this does not give you much time to act. If you’d like some help, I’d be happy to lend a hand. As a licensed CPA, I’ve helped countless taxpayers across the world file their US taxes accurately and on time.
Just contact me, and I can:
- Gather and review all the necessary documents
- Prepare your tax forms
- File your taxes on your behalf
I look forward to hearing from you!
If you’re in need of professional bookkeeping services, we recommend visiting our subsidiary, URSA Services LLC. They specialize in keeping your finances in order so you can focus on growing your business. Don’t worry, we’ll still be here to handle all your tax needs. Visit URSA Services LLC today to learn more!!
***Disclaimer: This communication is not intended as tax advice, and no tax accountant -client relationship results**