The Internal Revenue Service (IRS) has announced automatic penalty relief for taxpayers who had a balance due for tax years 2020 and 2021. This relief applies to failure-to-pay penalties on unpaid taxes less than $100,000.
Who is Eligible for Penalty Relief?
To be eligible for this relief, taxpayers must meet the following criteria:
- Filed a Form 1040, 1041, 1120 series, or Form 990-T tax return for years 2020 and/or 2021
- Were assessed taxes of less than $100,000
- Received an initial balance due notice (typically the CP14 or CP161) between Feb. 5, 2022, and Dec. 7, 2023
What is the Relief?
The IRS will automatically waive failure-to-pay penalties on assessed taxes less than $100,000 per year for tax years 2020 and 2021. This means that taxpayers will not have to pay penalties on any unpaid taxes that meet the eligibility criteria.
How to Claim the Relief
Taxpayers do not need to take any action to claim this relief. The IRS will automatically apply the relief to eligible taxpayers.
What if I Paid My Taxes in Full?
If you made payments on your account or your balance is paid in full, you are still eligible for automatic failure-to-pay penalty relief on assessed taxes less than $100,000 per year.
What if I Owe More Than $100,000?
Taxpayers with assessed taxes of $100,000 or more are not eligible for automatic relief. However, they can apply for penalty relief under the reasonable cause criteria or the First-Time Abate program.
The IRS’s automatic penalty relief is a significant benefit for taxpayers who had a balance due for tax years 2020 and 2021. This relief will help taxpayers avoid paying unnecessary penalties and make it easier for them to resolve their tax debts.
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FAQ
Is the IRS waiving underpayment penalties for 2020?
Can I get my underpayment penalty waived?
What are the conditions for underpayment penalty?
Can an underpayment penalty be avoided?
Generally, an underpayment penalty can be avoided if you use the safe harbor rule for payments described below. The IRS will not charge you an underpayment penalty if: You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year, or
Can an underpayment penalty be waived?
The underpayment penalty may also be waived by the IRS under several other scenarios, including: The taxpayer was a U.S. citizen or resident for the preceding tax year and did not owe any taxes for that year. The taxpayer missed a required payment because of a casualty event, disaster, or other unusual circumstance.
Does the IRS charge an underpayment penalty?
The IRS will not charge you an underpayment penalty if: You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year, or You owe less than $1,000 in tax after subtracting withholdings and credits This rule is altered slightly for high-income taxpayers.
What is the IRS underpayment of estimated tax penalty?
The IRS Underpayment of Estimated Tax penalty applies if you didn’t withhold enough taxes or didn’t pay enough estimated federal income taxes. Of course, knowing exactly how much tax you’ll owe each year can be challenging, especially if your income, deductions, and available tax credits change from year to year.