Paid a Penalty to the IRS? Plan on Getting It Refunded
The IRS has been a hot mess for over a year. People are still waiting on refunds from last year. And some people have even been penalized because of late tax returns – all because the IRS doesn’t have enough staff.
We’ve all heard about how the IRS has been given money to hire more agents. And now, it looks like there may be a benefit to more staff, at least for those who have had to pay penalties over the past year.
The IRS has officially announced that close to 1.6 million Americans will be getting a refund automatically if they filed certain tax returns in 2019 or 2020 late. If you haven’t yet filed your returns and think you’ll have to pay penalties, you’ll want to file on or by September 30 of this year to ensure you qualify.
The “failure to file” penalty can add up quickly. The IRS assesses the fees at 5% per month, all the way up to 25% of the unpaid tax when the federal return is filed. The refund could be hundreds or even thousands of dollars depending on how late the return was and how much the unpaid federal income tax was.
Those who are eligible for the return include those who filed 2019 and 2020 returns late using 1040 and 1120 series forms.
It’s not just individuals who are eligible for the refund of fees, either. Banks, employers, and businesses that filed returns with the 1099 series will also be eligible. The deadlines for those returns have passed, so you will have had to have filed already if you were hoping for a return.
The IRS says that most people who have already paid the penalty will see the reimbursement automatically – and that the refunds should be issued by the end of September.
Keep in mind that some people will be disqualified from receiving the refund. This includes those who had court-ordered penalties, penalties levied in a compromise, as well as fraudulent returns.
IRS Commissioner Chuck Rettig explained that penalty relief is complicated. “We’ve been working on this initiative for months following concerns we’ve heard from taxpayers, the tax community, and others, including Congress.”
The reason that the IRS is focusing on penalty relief, which adds up to around $1.2 billion, is to help the taxpayers who struggled during the COVID pandemic. Rettig goes on to say that the IRS provided relief in a variety of ways. And now, the penalty relief 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.”
This seems like the least the IRS can do. After all, they were backlogged for months, and many taxpayers struggled to get any kind of correspondence so that they could file in a timely manner.
The IRS has promised that they are using the massive relief measure to ensure that they can catch up on the backlog and return to normal operations in time for the 2023 filing season.
If you’re not sure whether you qualify for any kind of relief or not, you can visit the IRS website. A full list is provided so that you can plan on seeing some kind of automatic deposit into your bank account, courtesy of the IRS.