The IRS declared on Wednesday that it would absolve many Americans of penalties for filing their tax returns after the pandemic had already begun.
Penalties from the 2019 and 2020 tax years are eligible for refunds. The IRS will deduct any late-filing fines you accrued for either of those years if you haven’t already paid them. You will receive a credit or a refund if you have already paid for it.
According to the federal agency, more than 1.6 million filers will automatically receive penalty refunds or credits totaling more than $1.2 billion, with many payments anticipated by the end of September.
In a statement released on Wednesday, IRS Commissioner Chuck Rettig said, “The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time.”
The agency’s late filing penalty of 5% of your unpaid balance per month, with a maximum penalty of 25%, is also exempt from the waiver. 0.5% monthly late payment penalties are still possible.
For the penalty to be waived, individual tax returns must be filed by September 30, 2022. You might have already filed your taxes for 2019 and 2020, but that deadline still stands. (Remember that the pandemic delayed the regular tax filing deadlines for those two years.) Refunds are not available for penalties from the most recent tax season that are related to taxes due in 2021.
According to the IRS, there were 7.6 million paper filings and 9.3 million unprocessed individual returns from 2022 as of August 12.
The IRS stated that the majority of people can estimate receiving their payments or credits by the end of September. The agency anticipates distributing refunds totaling more than $1.2 billion. It’s unclear if taxpayers will be able to check the status of their refund online or if those refunds will be sent via mail or direct deposit. Money has requested more information from the IRS.
In order to resume “normal operations” in time for the 2023 filing season, the IRS has been “working aggressively” to handle backlogged returns and taxpayer correspondence. Additionally, according to the agency, the reduction in penalties will enable it to “focus its resources more effectively.”