The Internal Revenue Service gets grouchy when people do not file their income taxes on time, either by skipping an extension request, filing after the extension deadline or not submitting their tax return at all.
That’s not a surprise, and the IRS metes out a stiff “failure to file” penalty to emphasize its displeasure. It’s 5% of unpaid tax for each late month, making it more costly than the “failure to pay” penalty which levies a 0.5% ding for each month the taxes go unpaid. The IRS also charges interest on the penalties.
Yet here’s something that might be a pleasant surprise: the IRS is giving a break to tardy taxpayers by waiving the failure to file penalty applied to returns for tax years 2019 and 2020.
It’s a nod to the havoc of the pandemic’s earlier stages, when taxpayers and the IRS were scrambling. IRS and Treasury Department officials pushed the 2019 tax returns originally due on April 15, 2020 to July 15. The following year, they nudged the 2020 tax deadline to May 17, 2021. It’s also a way for the IRS to free up focus to address a backlog in tax return processing.
The best news for the freshly-announced penalty waiver? In many cases, people do not need to do a single thing to obtain the relief.
The IRS says it is automatically reimbursing people who already paid the penalty, estimating it will be refunding or crediting $1.2 billion in assessed penalties to nearly 1.6 million taxpayers. Most of these payments will occur by September’s end, the tax agency sai