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The IRS is waiving roughly $1 billion in late-payment penalties for thousands and thousands of taxpayers with balances beneath $100,000 from returns filed in 2020 and 2021.
Some 4.7 million particular person taxpayers, companies, trusts, estates and nonprofit organizations are eligible for the reduction, which quantities to about $206 per return, the company said Tuesday.
“IRS is offering a monetary breather to taxpayers,” mentioned licensed monetary planner Sean Lovison, founding father of Philadelphia-area Purpose Built Financial Services. He can also be an authorized public accountant.
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The penalty elimination is computerized and filers who already paid late-payment penalties for the 2020 and 2021 tax years will obtain a refund or credit score, the IRS mentioned. However, late-payment penalties for unpaid balances from 2020 and 2021 will resume April 1, 2024.
“December to April is clearly a time taxpayers need to put this away” and make a plan to repay balances to keep away from enforcement, mentioned Darren Guillot, nationwide director at Alliantgroup, who beforehand served as IRS deputy commissioner of the company’s small enterprise division.
December to April is clearly a time taxpayers need to put this away.
Darren Guillot
National director at Alliantgroup
The waiver applies to the failure-to-pay penalty, which is 0.5% of unpaid taxes monthly or partial month, capped at 25%.
However, eligible taxpayers may nonetheless be topic to the failure-to-file penalty and curiosity, the IRS mentioned. The late submitting penalty is 5% of unpaid taxes monthly or partial month, with a most price of 25%. Interest charges are at the moment 8% per 12 months, compounded each day.
‘Normal assortment mailings’ will resume in 2024
The penalty reduction comes because the IRS prepares to resume assortment notices that had been briefly paused in February 2022 due to “excessive inventories” created by the Covid-19 pandemic. In some instances, taxpayers with 2020 or 2021 balances may have solely obtained an preliminary discover earlier than the pause.
“As the IRS has been making ready to return to regular assortment mailings, we now have been involved about taxpayers who have not heard from us in some time instantly getting a bigger tax invoice,” IRS Commissioner Danny Werfel mentioned in an announcement. “The IRS ought to be searching for taxpayers, and this penalty reduction is a common sense strategy to assist individuals in this example.”
Starting subsequent month, the IRS will ship a “particular reminder letter” to inform taxpayers about their legal responsibility, methods to make a fee and particulars concerning the penalty reduction.
“You cannot bury your head and faux it’ll go away,” Guillot mentioned, noting the significance of taking motion after receiving an IRS discover.
Taxpayers have “versatile” payment options for unpaid balances and most filers can arrange fee plans by scanning the QR code from their IRS discover, he mentioned.
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