IRS Waiving $1B in Penalties For People & Firms Owing Back Taxes – Are You Eligible?

Heads up, everyone!

This year, you may be getting a Christmas gift from the IRS…

The IRS has just announced a $1 billion penalty relief program that will waive fees for people and firms who failed to pay back taxes in 2020 and 2021.

Starting next week, over 5 million individuals, businesses, and organizations will be forgiven for failing to pay back taxes. Or, if they paid the penalty fee, will get a refund.

If you qualify, you don’t need to do anything. Penalties will be waived and refunds will happen automatically.

The one-time relief program stems from issues with sending notification letters during the COVID pandemic.

Those eligible owe less than $100,000 per year in back taxes for tax years 2020 and 2021.

Money Cruncher summed up the details of the penalty relief program in a series of posts on X:

IRS temporarily suspended mailing automated reminders for overdue tax bills in 2020 and 2021.

That means that some taxpayers have not received a reminder notice from the IRS in more than a year.

This affected more than 5 million taxpayers..

— The Money Cruncher, CPA (@money_cruncher) December 20, 2023

The penalty relief only applies to eligible taxpayers with assessed tax under $100,000.

Eligible taxpayers include individuals, businesses, trusts, estates and tax-exempt organizations that tax returns for tax years 2020 or 2021.

What if you had more?

— The Money Cruncher, CPA (@money_cruncher) December 20, 2023

This penalty relief is automatic.

That means that if you’re an eligible taxpayer, you don’t need to take any action.

Well, what if you already paid it?

— The Money Cruncher, CPA (@money_cruncher) December 20, 2023

Now, beginning in January of 2024, the IRS will be issuing a special reminder letter to individuals with tax debts prior to tax year 2022

The reminder letter will explain any tax liability, how to pay, and the amount of penalty relief, if applied.

— The Money Cruncher, CPA (@money_cruncher) December 20, 2023

The New York Post reported on how the new IRS relief program came to be:

The IRS said Tuesday it is going to waive penalty fees for people who failed to pay back taxes that total less than $100,000 per year for tax years 2020 and 2021.

Nearly 5 million people, businesses and tax-exempt organizations — most making under $400,000 per year — will be eligible for the relief starting this week, which totals about $1 billion, the agency said.

The IRS temporarily suspended mailing automated reminders to pay overdue tax bills during the pandemic, beginning in February 2022, and agency leadership says the pause in automated reminders is a reason behind the decision to forgive the failure-to-pay penalties.

“Due to the unprecedented effects of the COVID-19 pandemic, these reminders would have normally been issued as a follow up after the initial notice,” the IRS said in a statement.

“Although these reminder notices were suspended, the failure-to-pay penalty continues to accrue for taxpayers who did not fully pay their bills in response to the initial balance due notice.”

CBS News explained who qualifies for the program:

Taxpayers are eligible for automatic penalty relief if they filed a Form 1040, 1041, 1120 series or Form 990-T tax return for years 2020 or 2021; owe less than $100,000 per year in back taxes; and received an initial balance-due notice between Feb. 5, 2022, and Dec. 7, 2023.

If people paid the failure-to-pay penalty, they will get a refund, Werfel said on a call with reporters. “People need to know the IRS is on their side,” he said.

Most of the roughly 5 million people, businesses and tax-exempt organizations who will get the relief make under $400,000 per year, the IRS said.