On Wednesday, August 24, the IRS announced it will waive penalties for many Americans who late-filed tax returns during the pandemic.
Nearly 1.6 million filers will automatically receive a collective $1.2 billion in penalty refunds or credits, according to the federal agency, with many payments expected to arrive by the end of September.
The relief applies to many individuals and businesses that filed late tax returns for 2019 and 2020, the IRS said.
The penalty abatement comes as the IRS faces ongoing criticism for a backlog of unprocessed tax returns. As of Aug. 12, there were 9.3 million unprocessed individual returns from 2022, according to the IRS, including 7.6 million paper filings.
Covid-19 has greatly impacted the federal agency’s ability to process paper returns, and missing returns have triggered additional notices that exacerbate the backlog as filers respond.
The IRS has been “working aggressively” to process backlogged returns and taxpayer correspondence, aiming to return to “normal operations” for the 2023 filing season, according to the notice. And the penalty relief will allow the agency to “focus its resources more effectively,” the agency said.
Which IRS Penalties Will Be Refunded?
The waiver applies to the IRS’s late filing penalty of 5% of your unpaid balance per month, capped at 25%. Late payment penalties of 0.5% per month may still apply.
Am I Eligible For A Refund?
Eligible tax returns include individual, corporate, estates and trusts and more. However, you must file the tax returns by Sept. 30 to qualify, the IRS said.
If you’re unsure of whether you’re eligible or if you have further questions regarding the IRS announcement, contact Denver’s best accounting team at Boxelder Consulting for more information today. Our tax attorneys and accounting experts are here to help!