Failure to File? Your Return may be Eligible for Penalty Relief

penalty reliefThe Internal Revenue Service (IRS) recently announced relief from penalties in certain cases for tax years 2019 and 2020. If you filed your return prior to September 30 of this year, you may see a failure to file (FTF) penalty removed from your return.


During any particular year, taxpayers have their own reasons for not filing tax returns. For those already behind in filing, or preparing a complex return, filing becomes daunting. The last few years have been like none other in contemporary history. Recognizing the strain the COVID-19 pandemic has placed on individuals and businesses, the IRS announced it will review and grant relief for failure to file penalties on certain 2019 and 2020 federal income tax returns, including the following: 

  • Income tax returns: The IRS will consider penalty relief for Forms 1040 and 1120 as well as Forms 1041, 1065, 1066, 990-T, and 990 PF
  • International information returns already assessed a penalty: Forms 5471, 5472, 3520, and 3520-A


This penalty relief initiative recognizes that many taxpayers and businesses faced challenges protecting their health, obtaining documents, relying on tax professionals who may have resituated their businesses in response to the pandemic, or were economically struggling, among other factors. 


The measure specifically provides relief from the penalty that is added to a return filed after the due date, or after an already extended due date. This is an important relief program as these fees can typically add five percent to the tax liability owed each month—up to a maximum of 25 percent. For international filers, penalties accrue when information returns are not filed in a timely manner. 


How does the penalty relief program work?

The program began in late August and automatically applies the relief measure to returns received by the agency through September 30, 2022. It is important to know there was no requirement or submission process to apply for the penalty abatement. Penalties previously added to the return will be automatically removed.


Refunds that result from the penalty abatement will be applied first to any outstanding liability.  Otherwise, taxpayers should watch their mailbox for a notice from the IRS that the FTF penalty was removed from their return, as well as any refund check that results. The IRS uses their last known address for mailing the checks and notices. If you have moved, now is the time to update your address with the IRS or create an online account with the IRS.


If you were assessed an FTF penalty in your 2019 and 2020 tax year returns, there may be a check heading your way in the next few months. 


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Serving international and local clients from offices in Chicago and Cleveland, the legal team at Robert J. Fedor, Esq., LLC is highly experienced with tax litigation, civil or criminal tax audits, offshore tax issues, and other tax controversies. We provide discrete legal services if you face a tax controversy. Contact us online or call us at 800-579-0997 today.


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