For anyone who missed the tax filing deadlines during the pandemic, the Internal Revenue Service (IRS) might actually, surprisingly, owe you money. 1.6 million filers are set to receive a collective $1.2 billion — but only if they file the right forms before the IRS deadline. Here's what you need to know.
The IRS is waiving tax penalties for many Americans.
On August 24th, the federal agency announced that penalties for late-filed tax returns from 2109 and 2020 will be waived. The step aims to relieve businesses and individuals impacted by the pandemic.
"Throughout the pandemic, the IRS has worked hard to support the nation and provide relief to people in many different ways," IRS Commissioner Chuck Rettig said.
"The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time," he added.
The IRS is also hoping this move will allow for faster processing of backlogged tax correspondence and returns that have piled up over the past two years, per the agency's media release.
And it is quite the backlog: CNBC reports that as of mid-August this year, the IRS had a queue of 9.3 million individual tax returns from 2022 still waiting to be processed.
Who is eligible to receive the 2022 tax waiver?
Anyone who filed taxes late in 2019 or 2020 and received penalties they had to pay up is eligible to have the fee refunded automatically. This includes individuals, corporations, estates, and trusts, per the IRS release.
"The waiver applies to the agency's late filing penalty of 5% of your unpaid balance per month, capped at 25%," CNBC explained. "Late payment penalties of 0.5% per month may still apply."
The amount each taxpayer or business will receive varies depending on how much was paid in late penalties.
Do you have to apply to get the IRS waiver?
"Penalty relief is automatic," the agency notes. "This means that eligible taxpayers need not apply for it. If already assessed, penalties will be abated. If already paid, the taxpayer will receive a credit or refund." But, if you haven’t filed your taxes yet for 2019 or 2020, you should get on it ASAP.
"To qualify for this relief, any eligible income tax return must be filed on or before September 30, 2022," the IRS notes.
That means that if the qualifying tax returns haven’t yet been filed, they should be filed ASAP, or individuals or businesses may be on the hook for paying their late fees.
When can individuals and businesses expect to receive the refund for the IRS waiver?
With the payments being automatically processed, the IRS said that the majority of the $1.2 billion that will be returned collectively would receive their payments by the end of September.
"Penalty relief is a complex issue for the IRS to administer," Rettig said. "We've been working on this initiative for months following concerns we've heard from taxpayers, the tax community, and others, including Congress. This is another major step to help taxpayers, and we encourage those affected by this to review the guidelines."