The IRS has provided certain eligible taxpayers with automatic relief from additions to tax for failure to pay income tax for tax years 2020 and 2021. Relief is only available to taxpayers who filed an eligible return during the relief period, which begins on either the date the IRS issued an initial balance due notice or February 5, 2022, whichever is later, ends on March 31, 2024.
Eligible taxpayers will have their additions to tax, imposed under Code Sec. 6651(a)(2) and (3) for the failure to pay during the relief period, waived. To be eligible, a taxpayer must have been:
- assessed income tax for the 2020 or 2021 tax year, as of December 7, 2023, in an amount less than $100,000, excluding any applicable additions to tax, penalties, or interest;
- issued an initial balance due notice (including, but not limited to Notice CP14 or Notice CP161) on or before December 7, 2023, for the 2020 or 2021 tax year; and
- be otherwise liable during the relief period for accruals of additions to tax for the failure to pay under Code Sec. 6651(a)(2) or (3) with respect to an eligible return for the 2020 or 2021 tax year.
Eligible taxpayers who filed eligible returns will have the accrual of additions to tax for the failure to pay taxes owed for the 2020 or 2021 tax year waived for the relief period or, to the extent previously assessed or paid, will have such additions to tax automatically abated, refunded, or credited to other outstanding tax liabilities, as appropriate, for the relief period. The relief applies to additions to tax for failing to pay taxes owed, but does not apply to any interest that accrues as a result of any underpayment.
This automatic relief does not apply to any addition to tax, penalty, or interest that is not specifically listed, nor to any return for which the penalty for fraudulent failure to file under Code Sec. 6651(f) or the penalty for fraud under Code Sec. 6663 applies.
Approximately 4.7 million taxpayers were not sent automated collection reminder notices during the COVID-19 pandemic. Due to the problems caused by the pandemic, the IRS suspended the mailing of automated reminders to pay overdue tax bills starting in February 2022. Normally, these reminders would have been issued as a follow up after the initial notice. Despite the reminder notices being suspended, the failure-to-pay penalties continued to accrue for taxpayers who did not fully pay their bills after receiving the initial balance due notice.
The IRS is preparing to return to normal collection mailings beginning April 1, 2024. But the first round of rebates may be sent out as early as January, 2024.