The Internal Revenue Service said that it is providing failure-to-pay penalty relief for roughly 4.7 million taxpayers who didn't receive automated collection reminder notices from the tax agency.
The IRS said in a Dec. 19 announcement that the $1 billion or so in total penalty relief will be granted to certain individual taxpayers, businesses, and tax-exempt organizations, for the taxable years 2020 and 2021.
Those eligible for the relief are those who did not receive automated reminders from the IRS to pay overdue tax bills when the agency temporarily suspended the mailing of such notices in February 2022 "due to the unprecedented effects of the COVID-19 pandemic."
Usually, these reminders are sent as a follow-up after an initial notice but the IRS didn't send them out because it was swamped by a backlog of millions of original and amended tax returns filed at the height of the pandemic that the agency was unable to process.
The IRS did, however, send out initial balance due notices and so penalties for failing to pay taxes owed continued to accrue.
Citing this "unusual situation," the IRS said it's waiving failure-to-pay penalties for certain affected taxpayers in advance of resuming their normal collection notices for tax years 2020 and 2021.
Taxpayers who are eligible for the automatic relief include individuals, businesses, trusts, estates, and tax-exempt organizations that filed certain tax forms, including 1040, 1120, 1041, and 990-T income tax returns.
However, this tax relief is only to eligible taxpayers who owe less than $100,000 in back taxes.
Taxpayers who are eligible for the automatic relief include individuals, businesses, trusts, estates, and tax-exempt organizations that filed certain tax forms, including 1040, 1120, 1041, and 990-T income tax returns.
"The IRS should be looking out for taxpayers, and this penalty relief is a common-sense approach to help people in this situation," IRS Commissioner Danny Werfel said in a statement. "We are taking other steps to help taxpayers with past-due bills, and we have options to help people struggling to pay."
The failure-to-pay penalty will resume on April 1, 2024, for those taxpayers who are eligible for the relief.