IRS provides penalty relief

The IRS is waiving approximately $1 billion in late payment penalties for taxpayers from 2020-2021 returns. You don’t need to do anything. You’ll get the refund (or credit, if you haven’t paid the penalty yet) automatically if it’s applicable to you. 

The waived penalty is the failure to pay penalty, which is 0.5% -25% of the unpaid taxes. There will still be a failure to file penalty for taxpayers who missed filing their returns. 

So if you missed paying your taxes on a quarterly basis or you were late paying the taxes completely, you likely have a credit. If you missed filing your return, you’ll get a penalty for that but will get a credit for the penalty of not paying your taxes. 

What this means

The Internal Revenue Service will automatically waive failure to pay penalties on assessed taxes less than $100,000 for tax years 2020 or 2021.

Individual, business, estate, trust or tax-exempt taxpayers are eligible for automatic failure to pay penalty relief if they:

• filed a Form 1040, 1041, 1120 series or Form 990-T tax return for years 2020 and/or 2021,

• were assessed taxes of less than $100,000,

• and received an initial balance due notice, typically the CP14 or CP161, between Feb. 5, 2022, and Dec. 7, 2023.

They do not have to take any additional actions to receive this relief:

• If they made payments on their account or their balance is paid in full, they are eligible for automatic failure to pay penalty relief on assessed taxes less than $100K per year. 

• A credit will automatically be applied to any other tax year with a balance due, otherwise they will receive a refund. 

• If their address has changed, they'll need to update their account to make sure they receive any IRS refunds or notices.