If you missed the deadline for 2019 or 2020 tax returns, you may receive a refund for late-filing penalties. But you must file overdue returns by Sept. 30 to qualify.
The IRS will shell out more than $1.2 billion in collective refunds or credits to nearly 1.6 million late filers, according to the federal agency.
Many individuals and small businesses will receive automatic payments by the end of September, the IRS said.
More from Personal Finance:
Borrowers in these states may owe taxes on student loan forgiveness
How to prepare for kids if your company slashes paid leave benefits
Inflation fears spur shoppers to get an early jump on the year-end holidays
“Throughout the pandemic, the IRS has worked hard to support the nation and provide relief to people in many different ways,” said IRS Commissioner Chuck Rettig.
The waiver applies to the agency’s late-filing penalty of 5% of your unpaid balance per month, capped at 25%. Late-payment penalties of 0.5% per month may still apply.
Eligible tax returns include individual, corporate, estates and trusts, and more, according to an IRS notice.
IRS penalty relief is ‘very welcome,’ tax pros say
The announcement comes as the IRS faces ongoing criticism for a backlog of unprocessed tax returns, despite promises from Rettig that the pileup will “absolutely” resolve before December.
As of Aug. 26, there were 8.2 million unprocessed individual returns filed in 2022, according to the IRS, including 6.5 million paper filings.
This relief is “very welcome,” said Albert Campo, a CPA and president of AJC Accounting Services in Manalapan, New Jersey.
Covid-19 has “greatly impacted” the agency’s ability to process paper, Campo said, and missing returns have triggered notices, further adding to the pileup when filers respond.
“With this broad relief, the burden on taxpayers, tax professionals and IRS staff should be alleviated to some extent,” he said.
The IRS has been “working aggressively” to process backlogged returns and taxpayer correspondence, aiming to return to “normal operations” for the 2023 filing season, according to the notice. The penalty relief will allow the agency to “focus its resources more effectively,” the IRS said.