The IRS said about 6.8 million Americans could skip this penalty when filing their tax returns for the previous two years following a recent relief measure. It could be seen as a way of giving back to the people and businesses who might have been financially crippled during the pandemic years.
By itself, the IRS has instituted practice to waive failure-to-pay penalties on assessed taxes of less than $100,000 for these tax years, affecting nearly 5 million taxpayers and offering approximately $1 billion in penalty relief. This action was prompted by COVID-19 when most taxpayers could not receive the expected balance due to reminder notices due to disruptions in normal collection processes.
Automatic relief, documents required, and eligibility: Find out if you qualify for this huge Tax Break
To benefit from this form of automatic penalty relief, taxpayers must meet particular requirements. These are taxpayers who have filed Form 1040, 1041, 1120 series or Form 990-T tax returns for 2020 and 2021, received a balance due notice between February 5, 2022, and December 7, 2023, and have unpaid taxes amounting to less than $100,000. The relief covers individual, business, estate, trust, and tax-exempt taxpayers.
Most importantly, these eligible taxpayers automatically receive this relief without taking any additional action. If they already have made payments on their account or have a paid-in-full balance, they will still be able to be automatically given the failure-to-pay assessed tax penalty of less than $100,000 per year. The IRS then offsets any amount due for any other tax year or issues a refund where no amount is due for the year.
Judgments of varying limitations and other courses of action: Know what steps to take if you don’t qualify
However, this relief measure is comprehensive while it has its degree of constriction. It exempts taxpayers with an assessed tax of $100,000 or more from receiving automatic debt relief. These individuals and businesses are not left without options to help them in their green energy pursuits. They can request penalty abatement based on reasonable cause or a First-Time Abate program.
It is also essential to realize and acknowledge that while the failure-to-pay penalty is being removed, it comes with a condition that interest on the remaining balance is not. Interest will continue to accumulate until such a time that the principal sum of the outstanding balance is repaid. Particularly, for those taxpayers who do not qualify for the automatic relief or have other unique situations regarding the tax credit, the IRS suggests contacting them after March 31, 2024.
Overview of payment method and the penalties that follow non-payment: Here’s how you can set up a Payment Plan
For those with outstanding tax liabilities who cannot pay their taxes in one lump sum, the IRS has provided mechanisms to enable the former to meet their tax responsibilities. These are using the Online Payment Agreement tool to set up a payment plan for the tax debt, an Offer in Compromise through which one can agree to pay less than the amount owed to satisfy the debt or an installment agreement that means one can pay off the amount in installments or even get a temporary suspension of the collection process.
Another message that the IRS wants people to understand is that it is bad to delay their response to the IRS notices because tax bills have a way of getting worse with time, and this is because of accrued fees, penalties, and interest. Further consequences for not paying taxes are the loss of such privileges as federal tax liens and levies on property or bank accounts and the inability to travel internationally with passports for individuals with tax debts over $59,000.
IRS Penalty Relief Measure: What you need to know to take advantage of this opportunity
Indeed, this penalty relief by the IRS is one of the measures undertaken to help citizens who faced some difficulties during the pandemic years. In its capacity to offer millions of Americans a way out, the IRS has already removed or instantaneously excused millions of dollars in failure-to-pay penalties for tax debts from the 2020 and 2021 fiscal years. However, it is necessary to note that these filings did not eliminate the obligation to pay taxes for taxpayers ultimately.
However, interest will continue to accrue to unpaid balances, and those who were issued with enormous tax bills may need to seek other forms of relief. In light of the current recovery from the pandemic, the IRS is back to normal collection activities, and every taxpayer needs to evaluate their tax affairs, use the available methods to pay taxes, and handle unsettled tax matters to avoid other severe measures from the IRS in the future.
An opponent of Salem’s payroll tax tables at Salem Reporter’s Town Hall Meeting on Oct. 11, 2023 at the Elsinore Theatre (Laura Tesler/Special to the Salem Reporter)