The IRS has recently introduced a penalty relief initiative to assist around 4.7 million individuals, businesses, and tax-exempt organizations who missed automated collection reminder notices during the pandemic. Valued at about $1 billion, this initiative targets those with assessed tax under $100,000, with most beneficiaries earning less than $400,000 annually.
Understanding the IRS Penalty Relief Initiative
The IRS decided to temporarily stop automated reminder notices in February 2022 due to the pandemic’s effects. However, the failure-to-pay penalty continued for those who didn’t fully pay their bills after the initial balance due notice.
To help taxpayers as the IRS resumes normal collection notices for tax years 2020 and 2021, a special reminder letter will be issued next month. This letter will outline outstanding liabilities, payment options, and the extent of penalty relief granted. Taxpayers struggling to pay their full balance are encouraged to visit IRS.gov/payments to make necessary arrangements.
Automatic Waiver for Eligible Taxpayers
The IRS is also waiving failure-to-pay penalties for eligible taxpayers affected by this situation for tax years 2020 and 2021. This relief is automatic, requiring no action from taxpayers. The initiative is estimated to save taxpayers $1 billion, equating to approximately $206 per return for the 4.7 million eligible entities.
Eligible taxpayers, including individuals, businesses, trusts, estates, and tax-exempt organizations, will benefit from this automatic relief, which applies to those with assessed tax under $100,000. The IRS will resume the failure-to-pay penalty on April 1, 2024, for taxpayers eligible for relief.
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