IRS Announces Failure-to-File Penalty Relief for 2019-20

Last week, the Internal Revenue Service issued Notice 2022-36, which provides automatic relief for certain failure-to-file penalties for tax years 2019 and 2020. The measure, which was advocated by the AICPA and other groups, aims to provide taxpayer relief from lingering pandemic-related financial struggles while allowing the IRS to focus its resources on supporting taxpayers in the current year.

This relief does not need to be requested by taxpayers. The IRS will automatically issue refunds or credits in qualifying cases, a process that is expected to be completed by the end of September, 2022. Forms that qualify, but have yet to be submitted per the deadlines listed below, will be delayed accordingly.

Deadlines and Qualifications
In order to qualify for the relief, any Form 1040, 1041 and 1120-series return for tax years 2019 or 2020 that is still unfiled must be submitted by September 30, 2022. Also eligible are Forms 1066, 990-PF and 990-T.

Certain international returns also qualify for this relief, providing that any unfiled returns are also submitted by September 30, 2022. Forms which fall under the notice include Forms 5471 and 5472, provided they are attached only to Forms 1065 and 1120. It specifically does not include Forms 5471 and 5472 if they are attached to other returns (such as 1040 or 1041).

Information returns, such as Form 1099, also qualify to have late-filing penalties abated, provided that they have already been filed. The deadlines for these filings are for returns that were filed by August 3, 2020 for 2019 returns, and August 2, 2021 for 2020 returns.

Lastly, penalties for failure to timely file for Forms 1065 and 1120-S may also qualify, depending on the information submitted on the forms.

Penalties that are specifically excluded from relief include cases of fraudulent failure to file. This includes cases that fall under Sections 6651(f) and 6663. Likewise, any penalties that have been accepted in a compromise or closing agreement under Section 7121, or determined in a judicial proceeding, do not qualify for abatement.

At Weiss & Company LLC, we continually strive to support our clients with timely and comprehensive accounting information. If you have questions about whether your returns for 2020 and 2021 may be affected by this IRS notice, contact your Weiss tax advisor today.