LMC - IRS Provides Penalty Relief for Certain Late Filed Returns

By David Neuman, JD

The Internal Revenue Service (“IRS”) has provided penalty relief in Notice 2022-36 for certain taxpayers from failure to file penalties and certain international information return penalties with respect to tax returns for the taxable years 2019 and 2020. In order to be eligible for the penalty relief, returns must be filed on or before September 30, 2022.

The reason for this relief is based upon the COVID-19 pandemic. In the Notice, the IRS explains that with a blanket abatement of penalties, IRS personnel can focus resources on processing the millions of returns backlogged by the pandemic and facilitate the IRS to get back to business as usual.

Any penalties for failure to file the following returns for taxable years 2019 and 2020 that are filed on or before September 30, 2022 will not be assessed and those that have already been imposed will be automatically abated, refunded, or credited without any need for taxpayers to request this relief:

Form 1040, 1040-C, 1040-NR, 1040-NR-EZ, 1040 (PR), 1040-SR, 1040-SS;
Form 1041, 1041-N, 1041-QFT;
Form 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, 1120-SF;
Form 1066; and
Form 990-PF, 990-T.

In addition, penalties for failure to the file the following international information returns also will not be assessed or will be automatically abated if the returns are filed on or before September 30, 2022:

Systematically assessed penalties for Form 5471, and/or 5472 attached to a late filed Form 1120 or 1065;
Campus assessment program assessed penalties for Form 3520 and 3520-A;
Penalties under section 6698 for failure to timely file or show the required information on Form 1065; and
Penalties under section 6699 for failure to timely file or show the required information on Form 1120-S.

The IRS will not impose the penalties under section 6721 for failure to file any information return that meets the following criteria:

2019 information returns filed on or before August 1, 2020; and
2020 information returns filed on or before August 1, 2021.

The penalty relief is not available for any return to which the penalty for fraudulent failure to file or the fraud penalty applies. The penalty relief does not apply to any penalties in an accepted offer in compromise.

If you have any questions please reach out to your LMC professional.