Eligibility for the IRS Failure-to-File Penalty Abatement

By Nate Miller, CPA, MST

August 29, 2022

A new development on the economic relief front was recently announced by the Internal Revenue Service (IRS). On August 24, 2022, the IRS announced IRS Notice 2022-36, an administrative action allowing the IRS not to impose specific penalties under certain conditions.

Struggling taxpayers who had to file tax and information returns late because of the pandemic will automatically receive relief from specific failure-to-file penalties for tax and information returns (2019 and 2020 tax years). The pandemic-related penalty relief is also tied to the recent Inflation Reduction Act’s efforts to provide relief to both taxpayers and the overburdened IRS.

Additionally, the IRS is providing penalty relief to banks, employers, and other businesses who failed to file various information returns, such as those in the 1099 series.

Eligible returns for the failure-to-pay abatement 

Any eligible income tax return must be filed on or before September 30, 2022, to qualify for relief. However, the IRS will ultimately determine whether a taxpayer or business qualifies for the abatement, refund, or credit, and no action is required to qualify. The relief applies to:

  • Individual income tax returns (Form 1040 series);
  • Fiduciary income tax returns (Form 1041 series);
  • C corporation income tax returns (Form 1120 series);
  • S corporation income tax returns (Form 1120-S);
  • Partnership income tax returns (Form 1065);
  • REMIC income tax returns (Form 1066);
  • Exempt organization income tax returns (Form 990 series); and
  • The following foreign information reporting forms:
    • Form 5471;
    • Form 5472;
    • Form 3520; and
    • Form 3520-A.

Eligibility criteria for the failure-to-file abatement

  • For the 2019 calendar year, returns must have been filed by August 3, 2020; or
  • For the 2020 calendar year, returns must have been filed by August 2, 2021.

For the nearly 1.6 million taxpayers who have already paid their penalties, the IRS will automatically issue more than $1.2 billion in refunds or credits by the end of September 2022. Aside from the additional economic assistance provided to recovering taxpayers set back by the pandemic, the move will allow the IRS to focus resources on the backlog of returns and return operations to normalcy for the upcoming 2023 filing season.

Many of these payments will be issued by the end of September 2022. Thus, you may receive an IRS notice in the mail informing you of automatic changes to your IRS account in the near future.

To learn more, see the frequently asked questions by visiting the related IRS information page. Reach out to your accountant or any member of our team with your questions. Email contactus@gccpas.net or call (209) 527-4220.