FILE 2019, 2020 RETURNS BY SEPTEMBER 30 TO GET COVID PENALTY RELIEF:

If you have clients who were negatively affected by the COVID-19 pandemic, they may qualify for late-filing penalty relief if they file their 2019 and 2020 returns by September 30. Besides providing relief to both individuals and businesses impacted by the pandemic, this step 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.

“We thought carefully about the type of penalties, the period covered and the duration before granting this penalty relief.  We understand the concerns being raised by the tax community and others about the Sept. 30 penalty relief deadline,” said IRS Commissioner Chuck Rettig. “Given planning for the upcoming tax season and ongoing work on the inventory of tax returns filed earlier this year, this penalty relief deadline of Sept. 30 strikes a balance. It is critical to us to not only provide important relief to those affected by the pandemic, but this deadline also allows adequate time to prepare our systems and our workstreams to serve taxpayers and the tax community during the 2023 filing season.”

The relief, announced last month, applies to the failure-to-file penalty. The penalty is typically assessed at a rate of 5% per month, up to 25% of the unpaid tax, when a federal income tax return is filed late. This relief applies to forms in both the Form 1040 and 1120 series, as well as others listed in Notice 2022-36, posted on IRS.gov.

This is automatic relief, and the IRS has already been sending out CP210 or CP 220 notices notifying taxpayers of the failure-to-file penalty relief. If the taxpayer has already paid the taxes and the penalty it will be a credit adjustment on their account and if the tax not yet paid the failure-to-file penalty will not be assessed.