IRS waives $1 billion in late payment penalties. Those who will receive relief are:

In 2020 and 2021, many Americans were preoccupied with a raging pandemic. Some people have fallen ill and are working toward recovery or have had to contend with long-term COVID-19 symptoms. Other people’s finances have taken a hit, and their energies have largely been focused on finding work and making plans to pay their rent or mortgage.

So it’s easy to see how tax filings were disrupted during that period. Unfortunately, failing to file your tax return on time can have negative financial consequences. Therefore, you may end up paying your tax bill late. But now the IRS is throwing a bit of a bone to those in the latter category.

Some tax relief is now possible

The IRS recently announced that it will waive approximately $1 billion in late payment penalties for taxpayers with balances of less than $100,000 on their 2020 and 2021 tax returns. This decision will affect approximately 4.7 million individual tax filers, businesses, estates and taxes. Exempt organizations.

Typically, late payment penalties charge filers 0.5% of the unpaid tax bill for each month, or the portion of the month in which the file is delinquent, up to a maximum of 25%. Interest may also accrue on unpaid amounts, which is different from the late payment or non-payment penalty itself.

However, the IRS is now waiving this penalty for 2020 and 2021 due to the circumstances tax filers are facing at the time. Anyone who has already paid the fine will receive a tax refund or credit to their account for that amount. However, the IRS warned that late payment penalties for unpaid balances for 2020 and 2021 will resume on April 1 of this year. So, any previous fines for that year will be waived, but if you still have a balance for that year, pay it now before the fines accrue again.

Penalty kicks are not completely ruled out

The IRS is waiving penalties for late payments in 2020 and 2021, but it is not doing the same for failure-to-file penalties. Non-filing penalties apply to late-filed tax returns when the balance is past due.

If there is no balance due and the filer is due a refund, there is no penalty for late filing. The way the IRS sees it, anyone in that boat is actually doing themselves a disservice by delaying their refund, so there’s no need to stretch the money any longer, not when the agency gets to keep it for longer.

However, fines for failure to report can be very costly. This can be equivalent to 5% of your unpaid tax bill for each month, or up to 25% if your return is late for some months. So if you didn’t file a tax return for 2020 or 2021 and owe money to the IRS, you’ll want to move as soon as possible.

Additionally, if you’re preparing for the 2024 tax season, you should make every effort to file your 2023 tax return on time if you think you might owe the IRS. Of course, the other way around is that filing on time means your tax refund will hit your bank account faster, which is reason enough to move.

But if you think you owe a balance from 2023, file your tax return by April 15 to avoid a penalty. If this is not possible, request an extension until April 15 to push back the individual submission deadline by six months. In this case, there is no additional time to pay the IRS balance. However, if you are late in submitting your return through the extension, the failure to file penalty will be waived for six months.

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