Nearly 5 million taxpayers who didn’t pay their tax bills from 2020 and 2021 will have nearly $1 billion in penalty fees waived by the Internal Revenue Service (IRS).
The IRS announced penalty relief in December for taxpayers who had past due tax bills but were not sent automated collection reminder notices during the pandemic. Although notices were not issued in 2020 and 2021, the non-payment penalty fell on taxpayers who did not pay their bills in full.
“As the IRS was preparing to return to regular collection mailings, we were concerned about taxpayers who had not heard from us in a while suddenly getting a larger tax bill. The IRS must take care of taxpayers, and reduce this penalty,” said Danny Werfel, commissioner. “It’s a common-sense approach to help people in this situation,” the IRS said in a statement. “We’re taking other steps to help taxpayers with overdue bills, and we have options to help people who are struggling to pay.”
Mailed IRS notices, which should start arriving in mailboxes this month, state the amount of penalty relief received. Taxpayers can also check IRS.gov to access their tax transcripts and records.
Full coverage: Taxes 2024 – Everything you need to file your taxes on time
What do you know about the non-payment waiver clause?
Penalty relief is automatic for taxpayers who owe back taxes, though it’s limited to tax bills of $100,000 or less, Rob Seltzer, a certified public accountant (CPA) at Seltzer Business Management, told Yahoo Finance.
“If the taxpayer has already paid the fine before the exemption is announced, his or her money will be automatically refunded,” he added.
If a taxpayer does not qualify for this relief, the IRS recommends applying for an exemption under the First-Time Abatement Program.
Another thing affected taxpayers should consider is interest, which the IRS has not waived.
“Although the penalties can be greater, there will still be interest due on the balance owed until it is paid in full,” Janet Lee Krochman, a certified public accountant (CPA), told Yahoo Finance.
Taxpayers should talk to tax professionals if they have questions about penalty or interest relief.
Taxpayers should also be aware of scammers pretending to be the IRS.
“The IRS will send letters, not emails or texts, and the IRS will not require payment via gift cards,” Lawrence Poon, CPA at Pon & Associates, told Yahoo Finance. “Any payments to the IRS can be made by check to the address provided in the letter or can be paid electronically to the IRS from your bank account or using a credit or debit card.”
Rhonda is Yahoo Finance’s Chief Personal Finance Correspondent and an attorney with experience in law, insurance, education, and government. Follow her on X @ronda writes
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