Staying Fit
If you paid a penalty for filing your 2019 or 2020 federal income tax return late, you may soon be getting a little something from the Internal Revenue Service (IRS): money back. Nearly 1.6 million taxpayers will automatically receive refunds or credits totaling $1.2 billion, with many payments being issued by the end of September.
No need to call
The failure-to-file penalty can be substantial. It’s usually 5 percent of the amount you owe that remains unpaid, up to a maximum of 25 percent a year. If your return is over 60 days late, there’s also a minimum penalty for late filing; it’s the lesser of $435 (for tax returns required to be filed in 2022) or 100 percent of the tax owed. If you still haven’t filed your 2019 or 2020 tax return, you must do so by Sept. 30 to qualify for the penalty relief.
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Penalty relief is automatic; you don’t have to apply for it. The penalty will be abated if the IRS has already assessed it on you but you haven’t paid. And if you’ve paid the penalty, you’ll get a credit or refund.
“Throughout the pandemic, the IRS has worked hard to support the nation and provide relief to people in many different ways,” said IRS Commissioner Chuck Rettig in an Aug. 24 statement. “The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time. This penalty relief will be automatic for people or businesses who qualify; there’s no need to call.”
Besides providing relief to both individuals and businesses hit by the pandemic, this step will let the IRS focus its resources on processing backlogged tax returns and taxpayer correspondence. As of Aug. 19, the IRS had 8.7 million unprocessed individual returns received in calendar year 2022. These include tax year 2021 returns and late-filed tax year 2020 and prior returns. Of these, 1.7 million returns require error correction or other special handling, and 7 million are paper returns waiting to be reviewed and processed, the IRS says.
You still have to pay
While you will get relief from the failure-to-file penalty, the IRS’s largesse does not apply to the failure-to-pay penalty, which is 0.5 percent per month and up to 25 percent of the unpaid tax when a federal income tax return is filed late. You’ll owe 5 percent interest on the unpaid taxes and the penalty as well; that rate will rise to 6 percent starting Oct. 1.
If you asked for a filing extension for your 2021 income taxes, you still must file by Oct. 17. The extension applies only to filing the tax return; you must have estimated the taxes you owe and paid by the April 18 filing deadline. Otherwise, you’ll owe the failure-to-pay penalties.
If you can’t pay your taxes, you can go online and apply for a payment plan .You may also get relief under the IRS First Time Abate program, which can ease some of the penalties for failure to pay your taxes.
