The Internal Revenue Service is taking a break on late filers as it gears up for more work ahead. The agency last week announced that it will refund more than $1.2 billion in late fees to taxpayers.
“Throughout the pandemic, the IRS has worked hard to support the nation and provide relief to people in many different ways,” IRS Commissioner Chuck Rettig said in a statement last week. “The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time," he said. The refunds will automatically be distributed to eligible individuals and businesses.
The agency also says that the initiative “is designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season.”
Close to 1.6 million taxpayers will receive refunds or credits as part of the initiative, “many” of them by the end of September, the agency said. To qualify for the relief, eligible income tax returns have to be filed by the end of September.
The IRS typically assesses late penalties at a rate of 5% per month and up to 25% of the unpaid tax in cases when the federal income tax return is filed late, according to the announcement.
In addition to the individual taxpayer relief, the IRS is also offering penalty relief for banks and other firms required to file 1099 and other information forms. That relief applies to 2019 returns that must have been filed by August 1, 2020, and 2020 returns that must have been filed by August 1, 2021, the agency says.
In this case, the IRS will consider as timely returns filed by August 3, 2020, and by August 2, 2021, since the August 1 deadlines fell on weekends, according to the announcement.
Furthermore, the agency is providing relief for late reporting of transactions with foreign trusts, receipt of foreign gifts, ownership interests in foreign corporations and other international information returns for eligible returns filed by the end of September, the IRS says.