IRS Abatement: Relief from Failure-to-File Penalties for Some

June 7, 2023


You may have heard the recent news from the IRS, and you may be eligible to benefit from it.

Due to the lingering effects of the global pandemic, the IRS, in an effort to aid struggling taxpayers, issued Notice 2022-36, which provides penalty relief to most people and businesses who file certain 2019 or 2020 returns late.

“Throughout the pandemic, the IRS has worked hard to support the nation and provide relief to people in many different ways,” said IRS Commissioner Chuck Rettig. “The penalty relief issued… is yet another way the agency is supporting people during this unprecedented time. This penalty relief will be automatic for people or businesses who qualify; there’s no need to call.”

Of course, like most credits, offers, and really anything codified federally, there are caveats and restrictions to this relief, and an overview of important takeaways follows: 

  • There is a short window to file the 2019 and 2020 return and be granted failure to file penalty relief.
  • 2019 and 2020 returns that are filed by September 30, 2022 are eligible for relief.
  • Individual returns and some business returns qualify.
  • The failure to file penalty is 25% of the tax amount due on the return due date.
  • The penalty is $2,500 for a tax amount due of $10,000.
  • If you are missing W2s or 1099s, those can be recovered from IRS.

Short Window to Late File and Benefit 

While there is a restricted time period in which taxpayers may take advantage of this relief, taxpayers do not need to jump through hoops or request this specific relief – it’s automatic – and the IRS will send automatic refunds and credits by the end of the following month. Any return that you’ve still not filed for the two tax years must be completed and filed by September 30, 2022 in order to be eligible for the relief.

Who and What Qualify for Relief?

Individual tax returns and some business returns qualify. Specifically, tax returns eligible for the relief include:

  • Specified returns Form 1040, 1041, and 1120 series are eligible.
  • Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return; Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation; and Form 990-T, Exempt Organization Business Income Tax Return (and Proxy Tax Under Section 6033(e) are also eligible.
  • Form 1065, U.S. Return of Partnership Income, and Form 1120-S, U.S. Income Tax Return for an S Corporation, may have penalties forgiven for failure to timely file and for failure to show required information.
  • Specific international information returns–Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, and Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, attached only to Forms 1065 and 1120.
  • Relief is NOT provided for taxpayers filing returns with certain international information returns, such as, Form 5471, attached to returns other than Forms 1065 and 1120, such as Form 1040 or 1041.
  • Also NOT eligible for relief specified in Notice 2022-36 are penalties for fraudulent failure to file under Sec. 6651(f) or the penalty for fraud under Sec. 6663.
  • Not eligible are any penalties included in an accepted offer in compromise, settled in a closing agreement under Sec. 7121, or finally determined in a judicial proceeding.
  • Additionally, some international information returns are eligible for a form of relief, so long as the eligible returns are filed on or before September 30, 2022.

This relief opportunity intended to aid struggling taxpayers also assists the IRS in processing the backlog of tax returns and correspondence adding to delays. While this offer helps the IRS, eligible taxpayers are wise to take advantage and use this opportunity to get in compliance now and avoid compounded penalties and interest in the future.

If you failed to file your 2019 or 2020 returns, we strongly urge you to act within this short grace period to come into compliance with your filing requirements without incurring a failure to file penalty. You have only until September 30, 2022, to file. Don’t miss this opportunity to receive abatement.

If you have any questions about your standing with the IRS, feel your business tax debt is beyond repair, or fear lack of documentation will keep you from the benefits of this abatement offer from the IRS, reach out to Tax Crisis Rescue today to learn about your options and take the first step toward compliance.

Schedule your free 40-minute consultation today.