If you've yet to file a 2019 or 2020 tax year return, you should get to work on that oversight soon. Like get them done by Sept. 30 soon.
By meeting that end-of-this-month date, you may be able to avoid the usual late-filing penalty. It's typically assessed at a rate of 5 percent per month, up to 25 percent of the unpaid tax.
And since the 2019 and 2020 due dates are long gone, that could be a substantial abated amount, depending on how much tax you owe.
Helping both taxpayers and tax agency: The Internal Revenue Service's penalty relief offer is an acknowledgement that both the agency and taxpayers struggled during the COVID-19 pandemic crunch to meet their tax responsibilities.
Taxpayers missed deadlines. IRS agents got overwhelmed by paper filings that stacked up when the agency closed offices as part of coronavirus safety protocols.
"We thought carefully about the type of penalties, the period covered and the duration before granting this penalty relief. We understand the concerns being raised by the tax community and others about the Sept. 30 penalty relief deadline," said IRS Commissioner Chuck Rettig.
The Sept. 30 penalty relief deadline strikes a balance for all, said the commissioner.
"It is critical to us to not only provide important relief to those affected by the pandemic, but this deadline also allows adequate time to prepare our systems and our workstreams to serve taxpayers and the tax community during the 2023 filing season," added Rettig.
In addition to providing relief to both individuals and businesses impacted by the pandemic, the IRS says getting unfiled returns in by Sept. 30 will allow it to focus its resources as it works toward a return to normal operations for the coming 2023 filing season.
Already penalized getting payback: The Sept. 30 deadline was noted back in August when the IRS announced relief for pandemic late filers who already were penalized.
Nearly 1.6 million such taxpayers will automatically receive more than $1.2 billion in refunds or credits to make up for previously assessed penalties caused by COVID-related late filings.
But since refunds were mentioned, that cash back topic got most of the attention.
Now, however, with Sept. 30 almost here, the IRS is reminding those who haven't filed 2019 or 2020 returns to get to it so they won't pay a bigger price due to penalty charges.
Partial penalty relief for some: While Sept. 30 is the cutoff for full failure-to-file penalty relief, if you miss the deadline, you might get a partial break.
The IRS says those who file during the first few months after the 9/30 deadline still will qualify for partial penalty relief. That's because, for eligible returns filed after that date, the penalty starts accruing on Oct. 1, rather than the return's original due date.
Since the penalty accrues based on each month or part of a month that a return is late, filing sooner will limit any charges that apply.
Failure to pay penalty still adding up: Note, too, that this special COVID-related penalty relief applies only to the failure to file, or late-filing, penalty.
The failure-to-pay penalty and interest will still apply to unpaid tax. That amount is based on the return's original due date.
The failure-to-pay penalty normally is one-half-of-one percent (0.5 percent) per month. The interest rate currently is 5 percent per year, compounded daily. The interest rate is set to rise to 6 percent on Oct. 1.
The only way to limit these penalty and interest charges is to pay your tax bill as soon as you can. If you're having difficulty coming up with the cash, the IRS offers some options if you can't pay your tax bill in full.
Qualifying penalty relief automatic: If you are eligible for any COVID late filing penalty relief, it's automatic as long as you file by Sept. 30.
As with the refunds going to those previously penalized, late-filing taxpayers who get their 2019 and/or 2020 returns in by the end of this month don't have to do anything else. There's no need to attach a statement or other documents to the return.
Note, too, that this relief does not apply to 2021 returns that were due on April 18. If you didn't file back then for an extension or didn't pay all the tax you owe, those late-filing and nonpayment penalties are accruing.
So if you haven't filed a return, regardless of the tax year, finish up the forms and get them to the Internal Revenue Service. Now.
You also might find these items of interest:
- IRS AI bots now helping taxpayers set up payment plans
- A review of tax penalties & their inflation-related hikes in 2022
- IRS refunding $1.2 billion to millions who faced COVID-related late-filing tax penalties