By Kelley R. Taylor
The IRS is waiving penalties for nearly $1 billion in back taxes owed during the pandemic. Here’s what you should know about who’s eligible and how the tax penalty relief works.
Just in time for the holiday season, the IRS announced a move to help individuals, businesses, and tax-exempt organizations that owe back taxes. The agency says it will waive nearly $1 billion in penalties for taxes owed by more than 4.7 million people and entities that didn’t receive automated collection reminders during the COVID-19 pandemic. The penalty relief mainly targets those earning under $400,000 a year.
IRS Commissioner Danny Werfel said the agency wants to help taxpayers with past-due bills.
“As the IRS has been preparing to return to normal collection mailings, we have been concerned about taxpayers who haven’t heard from us in a while suddenly getting a larger tax bill. The IRS should be looking out for taxpayers, and this penalty relief is a common-sense approach to help people in this situation,” Werfel explained in a statement.
IRS waiving $1 billion in tax penalties
During the pandemic, the IRS temporarily paused mailing its usual automated reminder to taxpayers who owed back taxes. Even though taxpayers didn’t receive reminder notices, failure to pay penalties continued to add up for those who didn’t pay their taxes in full after receiving an initial balance-due notice.
As a result, many taxpayers didn’t hear from the agency for more than a year after the initial notice was sent. So, the IRS is waiving failure-to-pay penalties for eligible taxpayers affected by the collection notice pause during 2020 and 2021. This penalty relief will potentially benefit nearly 5 million taxpayers and provide an estimated $1 billion in tax relief. (According to the IRS, that comes to about $206 per return.)