Penalty relief deadline fast approaches for 2019, 2020 tax returns

The deadline for late-filing penalty relief for 2019 and 2020 returns is Sept. 30, a date the IRS reconfirmed Friday.

“We thought carefully about the type of penalties, the period covered and the duration before granting this penalty relief. We understand the concerns expressed by the tax community and others regarding the September 30 deadline for the sentence relief,” IRS Commissioner Chuck Rettig said in a press release. “Given planning for the upcoming tax season and ongoing work on the inventory of tax returns filed earlier this year, this September 30th penalty relief period is a counterbalance. It’s important to us to bring important relief not just to those affected by the pandemic, but to them Deadline also leaves ample time to prepare our systems and our workflows to serve taxpayers and the tax community during the 2023 filing season.”

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The IRS unveiled the Penalty Relief Plan on August 24th. In an Aug. 30 comment letter, the AICPA applauded the IRS for providing relief but requested an extension of the deadline to Dec. 31. In a September 8 comment letter, the AICPA called for enhancements, changes and clarifications, including a requirement for 2021 tax returns (as well as 2016–2018 tax returns) to receive the same relief as for 2019 and 2020.

The IRS reiterated Friday that returns for 2021 are not eligible for relief.

The tax relief for tax years 2019 and 2020 applies to forms in the 1040 and 1120 series of forms as well as others listed in Notice 2022-36.

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The IRS estimates that 1.6 million taxpayers who have already paid penalties for late filing related to their 2019 and 2020 returns will automatically receive a total of $1.2 billion in refunds or credits.

Although the time is ending for full penalty relief for companies and individuals who have not yet filed their 2019 or 2020 returns, those who miss the deadline but file within the first few months after the September 30 deadline still qualify for a partial penalty help. For eligible returns submitted after the cut-off date, the penalties will apply starting October 1 in place of the original return due date. The IRS noted in the press release that the late filing penalty accrues based on each month or part of a month that a tax return is late, so earlier filing will cap any fees incurred.

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The late payment penalty is 5% of the unpaid tax per month, up to 25%.

While the IRS provides relief for non-time filing, the penalty for non-payment remains the same for all years — 0.5% of unpaid tax per month, based on the original tax return due date. Interest compounded daily is also accruing and the 5% interest rate is set to rise to 6% on October 1st.

— To comment on this article or suggest an idea for another article, contact Bryan Strickland at [email protected].

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