Beginning on January 1, 2024, the IRS will resume automated collection notices for all tax years. Individuals, businesses, trusts, estates, and tax-exempt organizations may be eligible for penalty relief for tax years 2020 and 2021. For taxpayers eligible for this relief, the failure-to-pay penalty will resume on April 1, 2024.
In 2022, the IRS paused follow-on notices that remind taxpayers of outstanding tax bills. The pause represented an effort by the agency to work through pandemic backlogs of paper returns and correspondence with taxpayers. Due to the pause, some taxpayers were not notified of accrued penalties and interest associated with their tax bill for an extended time period.
For failure-to-file penalties, the IRS will grant penalty relief to eligible taxpayers with assessed tax below $100,000. Eligible taxpayers include individuals, businesses, trusts, estates, and tax-exempt organizations that filed certain Form 1040, 1120, 1041, and 990-T series income tax returns for tax years 2020 or 2021. Further to be eligible, taxpayers must have been in the IRS collection notice process or issued an initial balance due notice on or before December 7, 2023 for tax years 2020 or 2021. Please note the $100,000 of assessed tax applies separately to each return and each entity.
The relief will be automatic and result in a refund or a credit to the taxpayer. Refunds will be sent to eligible taxpayers starting on December 19, 2023, and will continue to be issued through early 2024.
IRS Notice 2024-7 informs taxpayers the IRS will resume follow-on notices and provide relief to eligible taxpayers.
If you may be eligible for penalty relief but have not yet received it, or have other federal tax concerns, please do not hesitate to contact Dan Eller, John Way, or Andrea Moore.
This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.