The IRS recently announced (Notice 2022-36) that it will automatically abate late filing penalties for 1.6 million taxpayers. The automatic abatement covers specified penalties and returns for tax year 2019 and 2020 that are filed on or before Sept. 30, 2022. The penalty relief includes failure-to file penalties for Forms 1040, 1040-C, 1040-NR, 1040-SR, 1040-SS, 1041, 1041-N, 1041-QFT, 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, 1120-S, 1065, 1066, 990-PF, and 990-T. The penalty relief also includes the following international information return penalties:
- Penalties systematically assessed when a Form 5471 or 5472 is attached to a late-filed Form 1120 or Form 1065
- Penalties assessed by the campus assessment program with respect to Form 3520 and 3520-A filings
- Failure to file Form 1065 or 1120-S
The penalty relief also includes penalties for failure to file certain 2019 and 2020 information returns, such as those in the 1099 series, which are filed on or before Aug. 1, 2020, and Aug. 1, 2021, respectively.
The abatement provides significant relief to affected taxpayers and reduces the IRS burden for administering penalties that arose during the height of the COVID-19 pandemic. Because the abatement is automatic, taxpayers do not need to take any affirmative steps to receive the abatement. Taxpayers who are eligible for abatement and have already paid these penalties will receive a refund as early as late September 2022. The IRS estimates the refunds alone will total $1.2 billion.
The penalty relief provided by the notice does not apply to any penalties in an accepted offer in compromise under Section 7122, nor does it apply to any penalty settled in a closing agreement under Section 7121, or finally determined in a judicial proceeding.
Eligible taxpayers with delinquent 2019 and 2020 returns should plan on filing those returns on or before Sept. 30, 2022, to take advantage of this significant penalty relief. This deadline is rapidly approaching, and delinquent taxpayers should now act with urgency to meet this important new deadline.
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