IRS to waive $1 billion in penalties. Here’s who qualifies and how much taxpayers may get

The IRS is waiving roughly $1 billion in late-payment penalties for millions of taxpayers with balances impaired $100,000 from returns filed in 2020 and 2021.

Some 4.7 million individual taxpayers, businesses, trusts, stations and nonprofit organizations are eligible for the relief, which amounts to about $206 per return, the agency said Tuesday.

“IRS is produce a financial breather to taxpayers,” said certified financial planner Sean Lovison, founder of Philadelphia-area Purpose Built Economic Services. He is also a certified public accountant.

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The discipline removal is automatic and filers who already paid late-payment penalties for the 2020 and 2021 tax years will receive a refund or honour, the IRS said. However, late-payment penalties for unpaid balances from 2020 and 2021 will resume April 1, 2024.

“December to April is distinctly a time taxpayers want to put this away” and make a plan to pay off balances to avoid enforcement, said Darren Guillot, nationwide director at Alliantgroup, who previously served as IRS deputy commissioner of the agency’s small business division.

The waiver applies to the failure-to-pay sentence, which is 0.5% of unpaid taxes per month or partial month, capped at 25%.

However, eligible taxpayers may still be substance to the failure-to-file penalty and interest, the IRS said. The late filing penalty is 5% of unpaid taxes per month or partial month, with a peak fee of 25%. Interest rates are currently 8% per year, compounded daily.

The penalty relief comes as the IRS prepares to resume collection notices that were temporarily paused in February 2022 due to “on a trip inventories” created by the Covid-19 pandemic. In some cases, taxpayers with 2020 or 2021 balances may have not received an initial notice before the pause.

“As the IRS has been preparing to return to normal collection mailings, we have been vexed about taxpayers who haven’t heard from us in a while suddenly getting a larger tax bill,” IRS Commissioner Danny Werfel said in a disclosure. “The IRS should be looking out for taxpayers, and this penalty relief is a common-sense approach to help people in this situation.”

Starting next month, the IRS require send a “special reminder letter” to inform taxpayers about their liability, ways to make a payment and squads about the penalty relief.

“You can’t bury your head and pretend it will go away,” Guillot said, noting the account of taking action after receiving an IRS notice.

Taxpayers have “flexible”