Bulletin - IRS Provides Penalty Relief on 5 Million Returns

 




The IRS announced this week that it was providing about $1 billion in penalty relief to taxpayers who should have received collection notices during the pandemic - specifically applying to 2020 and 2021 tax returns. 

The Press Release  has several nuggets beyond the headline penalty relief. These nuggets provide guidance on several topics. Among the interesting items:


  • Quoting from the Press Release - Given this unusual situation, the IRS is taking several steps in advance of resuming normal collection notices for tax years 2020 and 2021 to help taxpayers with unpaid tax bills, including some people who have not received a notice from the IRS in more than a year. (Italics added).
  • This penalty relief is automatic. Eligible taxpayers don't need to take any action to get it. Eligible taxpayers who already paid their full balance will benefit from the relief, too; if a taxpayer already paid failure-to-pay penalties related to their 2020 and 2021 tax years, the IRS will issue a refund or credit the payment toward another outstanding tax liability.
  • Taxpayers who are not eligible for this automatic relief also have options. They may use existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First-Time Abate program. 

We've had a lot of confusion about the scope of IRS collection efforts since the pandemic, starting with the notices. Several prior press releases indicate that at various times (April 2023, June 2023, and October 2023) that IRS notices were resuming.  Apparently this was not accurate. Based on the information contained in this press release, the IRS is telling us that they have not made any collection efforts on 2022 and 2021, beyond sending out CP14 and CP161 notices. 

So, many taxpayers are due a surprise soon, a post Christmas present as it were. 

My advice - 

  1. Don't ignore collection letters.
  2. Confirm you received the credit promised in the press release.
  3. Use this opportunity to apply for relief under the First Time Abatement program. 

The IRS provides us with guidance here and confirms my opinion that it has not been aggressively pursuing collection efforts on all taxpayers. While it will be uncomfortable to enter into some kind of payment agreement, especially post holiday, this represents a great opportunity to get this off your plate. 

I encourage you to call my office with any questions. 



Location: 1 Chisholm Trail Rd Suite 450, Round Rock, TX 78681, USA

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