On August 24, 2022, the IRS issued Notice 2022-36 to announce broad-based penalty relief for certain failure to file penalties with respect to tax returns for taxable years 2019 and 2020 as long as they are filed by September 30, 2022. The Notice also provides relief from certain information return penalties with respect to taxable year 2019 returns that were filed on or before August 1, 2020, and with respect to taxable year 2020 returns that were filed on or before August 1, 2021. This penalty relief program applies to late filing penalties only, and it does not apply to penalties relating to the failure to pay the appropriate amount of tax by the original due date.
If the Notice applies, the relevant penalties will be waived, and if the penalties were previously assessed, they will be abated, refunded, or credited to affected taxpayers. Affected taxpayers do not need to show reasonable cause for the filing delay and they do not need to show they were negatively impacted by COVID-19, though COVID-19 presumably is the reason the IRS granted this relief.
No penalty relief was provided for 2021 tax returns, penalties not explicitly listed in the Notice, certain fraud-related penalties, and penalties in an accepted offer in compromise or closing agreement executed with the IRS.
The wavier applies to the following penalties with respect to taxable years 2019 and 2020 as long as the returns are filed by September 30, 2022:
- Additions to tax under §6651(a)(1) for tax forms in series 1040 (individual tax returns), 1041 (estate and trust tax returns), 1120 (corporate tax returns) but not 1120-S (see below), 1066 (REMIC tax returns), and 990 (exempt organization tax returns).
- Penalties under §§6038, 6038A, 6038C, 6039F, and 6677 for tax forms in series 5471 and 5472 (both of which relate to foreign corporations) and 3520 (foreign trusts and gifts).
- Penalties under §6698(a)(1) & (2) for form 1065 (partnership tax returns).
- Penalties under §6699(a)(1) for form 1120-S (S corporation tax returns).
In addition, the IRS will not impose the penalties under §6721(a)(2)(A) for failure to timely file certain information returns.
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For more information on this topic, please contact a member of Withum’s Business Tax Services Team.
