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Deadline Is 9/30 for Notice 2022-36 Failure-to-File Relief for Tax Returns & Information Returns

by Pamela Drucker
September 01, 2022

IRS Notice 2022-36 has provided targeted penalty relief for individuals and entities that have failed to timely file certain 2019 or 2020 returns. This relief is only available to taxpayers who file eligible returns on or before September 30, 2022.

The IRS has agreed to automatically abate, refund or credit, as appropriate, failure-to-file penalties for certain tax returns and information returns specifically listed in the Notice for tax years 2019 and/or 2020. The relief extends to foreign information return penalties related to Form 5471 (potential penalty of $10,000 per failure) and Form 5472 (potential penalty of $25,000 per failure) when those forms are attached to either a Form 1120 or Form 1065 that is not filed timely. Relief is also available for late-filed Form 3520 and Form 3520-A.

The Notice does not provide relief from penalties for Forms 5471 or Forms 5472 (or any other type of foreign information reporting form) that are attached to any other types of late-filed tax returns, such as Forms 1040, 1041 and 1120-S . In addition, penalty relief does not apply to any penalty that is: (1) related to fraud; (2) included in an accepted offer in compromise; or (3) included in a closing agreement or finally determined in a judicial proceeding..

Who does this affect?

  • Taxpayers who have not yet filed or late filed various 2019 and/or 2020 federal tax returns and informational forms
    • Taxpayers with 2019 or 2020 delinquent returns – September 30 deadline
    • Taxpayers with assessed penalties – no filing required

Why is this relevant?

  • The notice, which was released by the IRS on August 24, provides penalty relief to most people and businesses who file certain 2019 or 2020 returns late.
  • There is an opportunity to avoid large penalties if returns are filed by the September 30 deadline.

What is in the notice?

  • Penalty relief issued by the IRS applies to the failure-to-file penalty, which is typically assessed at a rate of 5% per month and up to 25% of the unpaid tax when a federal income tax return is filed late.
  • This relief allows the IRS to focus resources more effectively and provide relief to taxpayers affected by the COVID-19 pandemic.
  • A full list of waived penalties is available in section 3.A of Notice 2022-36.

How do taxpayers qualify to receive this relief?

  • The penalty relief is automatic, given the necessary qualifications are met:
    • To qualify for this relief, any eligible income tax returns for taxable years 2019 and 2020 must be filed on or before September 30, 2022. Taxpayers who have not yet filed 2019 and/or 2020 eligible tax returns should contact a tax professional to see if they are eligible for penalty relief under Notice 2022-36.
    • To qualify for relief from certain information return penalties, the notice states that eligible 2019 returns must have been filed by August 1, 2020, and eligible 2020 returns must have been filed by August 1, 2021.
    • To qualify for relief from various international information returns (transactions with foreign trusts, receipt of foreign gifts, and ownership interests in foreign corporations), any eligible tax return must be filed on or before September 30, 2022. Taxpayers who have not yet filed 2019 and/or 2020 eligible information returns should contact a tax professional to see if they are eligible for penalty relief under Notice 2022-36.
  • Penalty fines already assessed will be abated and taxpayers who have already paid fines will receive a credit or refund, with most eligible taxpayers receiving their refunds by the end of September.

If you have questions about the penalty relief or need assistance filing, contact our experts.

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