IRS Provides Penalty Relief for 2019 and 2020 Returns

September 2, 2022 – The IRS has issued Notice 2022-36 which provides penalty relief for taxpayers that failed to file certain 2019 and 2020 tax returns if those returns are filed by September 30, 2022.  In addition, the IRS will automatically abate previously assessed unpaid penalties and will refund or credit any previously assessed paid penalties for taxpayers that would have qualified for relief under Notice 2022-36 had they not previously filed.

Under these relief provisions, the IRS will waive the failure to file penalty for the following income tax returns:

  • Individuals:  Form 1040, Form 1040-C, Form 1040-SR, Form 1040-NR, Form 1040-NR-EZ, Form 1040(PR), Form 1040-SR, and Form 1040-SS.
  • Estates and Trusts:  Form 1041, Form 1041-N, and Form 1041-QFT.
  • Corporations:  Form 1120, Form 1120-C, Form 1120-F, Form 1120-FSC, Form 1120-H, Form 1120-L, Form 1120-ND, Form 1120-PC, Form 1120-POL, Form 1120-REIT, Form 1120-RIC, and Form 1120-SF.
  • Exempt Organizations:  Form 990-PF and Form 990-T.
  • Pass-Through Entities:  Form 1065 and Form 1120-S.

The IRS also will provide penalty relief for taxpayers that failed to timely file the following information returns:

  • Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, included with a late-filed Form 1065 or Form 1120.
  • Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, included with a late-filed Form 1065 or Form 1120.
  • Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.
  • Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner.
  • 2019 Forms 1099 (and certain other information returns) filed on or before August 1, 2020.
  • 2020 Forms 1099 (and certain other information returns) filed on or before August 1, 2021.

The relief is not available for all late filed forms or penalties and only applies to those specified in Notice 2022-36.  The relief also is not available to taxpayers that entered into a closing agreement with the IRS for an eligible 2019 or 2020 return, accepted an offer in compromise from the IRS that included penalties, had final penalties determined by a court, or filed a fraudulent return.

Taxpayers that have failed to file any of the returns listed in Notice 2022-36 should act immediately to ensure that those returns are completed and filed by September 30, 2022, to take advantage of these relief provisions.

Whitley Penn is continually monitoring tax and economic developments and will send out additional alerts in the future. In the interim, please contact your Whitley Penn tax advisor if you have any questions or require any additional information.