If you filed late during the pandemic, that is!
If you — or a business you own — paid a penalty for filing late tax returns for 2019 and 2020, you will automatically receive a refund from the IRS!
So What’s the Deal?
The government forecasts refunds totaling more than $1.2 billion from failure-to-file penalties are due to be refunded to around 1.6 million taxpayers. These refunds will be paid out as early as the end of September.
Failure-to-pay penalties will not eligible for a refund — meaning that if you owed taxes for those years, but did not pay the taxes when due, IRS will keep you on the hook for those amounts due (both the original taxes, plus the penalties, plus interest if you still haven’t paid them.
The IRS announced last month that it will give back the penalties it fined taxpayers for failing to submit their tax returns on time during the first two years of the COVID-19 pandemic — that is, during 2020 for 2019 tax returns, during 2021 for 2020 tax returns. Eligible tax returns include individual, corporate, estates and trusts, and more.
Taxpayers issued a late filing fee who have not yet paid it will have the penalty charge removed.
The IRS said the refunds will also allow the agency to “focus its resources on processing backlogged tax returns and taxpayer correspondence” ahead of the 2023 filing season. As this blog has explained in recent months, the IRS is still way behind the 8-ball in their pandemic backlog, and the domino-effect has carried forward into the present year. As of the third week of August, there were still 8.2 million unprocessed individual returns filed during 2022 so far, including 6.5 million filings on paper awaiting manual data entry. Way behind the 8-ball!
In combination with other fiscal and management reforms this year, the pandemic late-filing penalty refunds are a stroke of P.R. genius — and very necessary.
How the Refunds Will Work
You do not need to call IRS to ask for your money back — nor are there any forms to fill out. They say the refunds will be automatic, presumably paid by check — or in some instances through direct deposit, assuming they can validate the accounts into which they attempt to make that transaction.
Taxpayers filing late typically get charged a penalty of 5% of what they owe per month, up to a maximum of 25% of their unpaid tax bill. These amounts are eligible to get refunded to you for the periods in question — but again, the tax you owed at the time the filing was due is still subject to late payment penalties of 0.5% per month plus subsequent interest.
To qualify for refund of the late filing penalty, taxpayers (whether individuals or businesses) must have filed their late 2019 and 2020 tax returns on or before Sep 30, 2022. If you have not yet filed for 2019 or 2020 yet, there is still time to do so — without penalty! Do it now! And best to file electronically.
How to Steer Clear of Problems with IRS and Other Tax Collectors
Still want help with any tax issue? How about planning ahead for filing your 2022 tax returns in 2023? Or maybe you have unresolved or looming tax problems you just need to talk about with a trusted professional? The expert accountants at Baum CPA are ready and eager to help you! We specialize in small business, including the self-employed, ROBS arrangements, and franchise agreements. If you have tax concerns, own a business, or are thinking about starting or acquiring your own business entity, we invite you to make an appointment for an initial consultation. Just click this link.
This blog and its authors provide this content strictly for informational purposes. No content herein should be misconstrued as financial advice. Everyone’s specific circumstances vary — Always consult with a qualified, licensed financial advisor, legal counsel, and tax professional before venturing into any investment or business activities.