File 2019 and 2020 tax returns by Sept. 30 to receive COVID penalty relief

Published 7:10 am Wednesday, September 28, 2022

Individuals and businesses, affected by the COVID-19 pandemic, may qualify for late-filing penalty relief if they file their 2019 and 2020 tax returns by September 30, 2022. This penalty relief is automatic. Eligible taxpayers who already filed their tax return do not need to apply for it, and those filing now do not need to attach any additional statement or document to their tax return. Most taxpayers should receive these refunds by the end of September.

The relief was announced last month. It only applies to the failure-to-file penalty. This penalty is usually assessed at a rate of 5% per month, up to 25% of the unpaid tax, when a federal income tax return is filed late. This relief applies to forms in the Form 1040 and 1120 series, as well as others listed in Notice 2022-36, on IRS.gov.

This is a great opportunity for those who fell behind on their taxes during the pandemic to catch up. Any eligible income tax return must be filed on or before September 30, 2022.

The failure-to-pay penalty and interest will still apply to unpaid tax, based on the return’s original due date. The failure-to-pay penalty is normally 0.5% per month. The interest rate is currently 5% per year, compounded daily, but that rate is due to rise to 6% on October 1, 2022.

Taxpayers can limit these charges by paying as soon as possible. For fast and convenient electronic payment options, taxpayers can visit the Payments page of IRS.gov. Penalty and interest charges generally don’t apply to refunds.

Certain international tax returns may qualify
The notice also provides details on relief for filers of certain international information returns when a penalty is assessed at the time of filing. No relief is available for applicable international information returns when the penalty is part of an examination. To qualify for this relief, any eligible tax return must be filed on or before September 30, 2022.

Which tax returns are not eligible
Penalty relief is not available in all situations, such as where a fraudulent return was filed, where the penalties are part of an accepted offer in compromise or a closing agreement, or where the penalties were finally determined by a court. For complete details, taxpayers should read Notice 2022-36, available on IRS.gov.

Other penalties, such as the failure to pay penalty, are not eligible. However, taxpayers may use existing penalty relief procedures for penalties not eligible under Notice 2022-36. More information about existing procedures is available on the Penalty Relief page of IRS.gov.

This relief doesn’t apply to any 2021 tax returns. Everyone who still needs to file a 2021 tax return should do so as soon as possible.

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