IRS Announces Automatic Penalty Relief for Certain Tax Year 2019 and 2020 Returns

A kinder and gentler IRS?  Who knows.  One can only hope that the IRS’ latest move – granting sweeping, automatic penalty relief for a multitude of tax year 2019 and 2020 return filings – is trend-setting.

In Notice 2022-36, the IRS announced broad penalty relief for certain failure to file penalties and certain international information return penalties with respect to tax returns for taxable years 2019 and 2020. This relief, however, is only available for taxpayers who file the returns on or before September 30, 2022. The IRS simultaneously declared relief from certain information return penalties with respect to taxable year 2019 returns that were filed on or before August 1, 2020, and with respect to taxable year 2020 returns that were filed on or before August 1, 2021. No showing of reasonable cause, nor even any explanation, is required. The relevant penalties will be automatically waived or, to the extent previously assessed, abated, refunded, or credited.

Specifically, the IRS will grant automatic penalty relief for the following:

• With respect to additions to tax under section 6651(a)(1) for failure to file the following income tax returns –
  • Form 1040 , U.S. Individual Income Tax Return; Form 1040-C , U.S. Departing Alien Income Tax Return; Form 1040-NR , U.S. Nonresident Alien Income Tax Return; Form 1040-NR-EZ , U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents; Form 1040 (PR) , Federal Self-Employment Contribution Statement for Residents of Puerto Rico; Form 1040-SR , U.S. Tax Return for Seniors; and Form 1040-SS , U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico);
  • Form 1041 , U.S. Income Tax Return for Estates and Trusts; Form 1041-N , U.S. Income Tax Return for Electing Alaska Native Settlement Trusts; and Form 1041-QFT , U.S. Income Tax Return for Qualified Funeral Trusts;
  • Form 1120 , U.S. Corporation Income Tax Return; Form 1120-C , U.S. Income Tax Return for Cooperative Associations; Form 1120-F , U.S. Income Tax Return of a Foreign Corporation; Form 1120-FSC , U.S. Income Tax Return of a Foreign Sales Corporation; Form 1120-H , U.S. Income Tax Return for Homeowners Associations; Form 1120-L , U.S. Life Insurance Company Income Tax Return; Form 1120-ND , Return for Nuclear Decommissioning Funds and Certain Related Persons; Form 1120-PC , U.S. Property and Casualty Insurance Company Income Tax Return; Form 1120-POL , U.S. Income Tax Return for Certain Political Organizations; Form 1120-REIT , U.S. Income Tax Return for Real Estate Investment Trusts; Form 1120-RIC , U.S. Income Tax Return for Regulated Investment Companies; and Form 1120-SF , U.S. Income Tax Return for Settlement Funds (Under Section 468B );
  • Form 1066 , U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return; and
  • Form 990-PF , Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation; and Form 990-T , Exempt Organization Business Income Tax Return (and Proxy Tax Under Section 6033(e) ).
• With respect to certain penalties under sections 6038 , 6038A , 6038C , 6039F and 6677 for failure to timely file international information returns –
  • Penalties systematically assessed when a Form 5471 , Information Return of U.S. Persons With Respect To Certain Foreign Corporations, and/or Form 5472 , Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, is attached to a late-filed Form 1120 or Form 1065.
  • Penalties assessed by the campus assessment program with respect to filings on Form 3520 , Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, and on Form 3520-A , Annual Information Return of Foreign Trust With a U.S. Owner (Under section 6048(b) ).
  • Penalties under section 6698(a)(1) for failure to timely file and under section 6698(a)(2) for failure to show the required information on a Form 1065 , U.S. Return of Partnership Income.
  • Penalties under section 6699(a)(1) for failure to timely file and under section 6699(a)(2) for failure to show the required information on a Form 1120-S , U.S. Income Tax Return for an S corporation.
• With respect to penalties under section 6721(a)(2)(A) for failure to timely file any information return (as defined in section 6724(d)(1) ) –
  • 2019 returns that were filed on or before August 1, 2020, with an original due date of January 31, 2020; February 28, 2020 (if filed on paper) or March 31, 2020 (if filed electronically); or March 15, 2020.
  • 2020 returns that were filed on or before August 1, 2021, with an original due date of January 31, 2021; February 28, 2021 (if filed on paper) or March 31, 2021 (if filed electronically); or March 15, 2021.

Of course, the IRS was careful not to be too generous. The penalty relief is not available with respect to any return to which the penalty for fraudulent failure to file under section 6651(f) or the penalty for fraud under section 6663 applies. The penalty relief also does not apply to any penalties in an accepted offer in compromise under section 7122, nor any penalty settled in a closing agreement under section 7121 or finally determined in a judicial proceeding.

A copy of Notice 2022-36 is linked HERE.

If you have any questions about Notice 2022-36 or any other IRS or tax-related matter, feel free to contact me directly at (214) 749-2464 or adaddino@meadowscollier.com.