The Internal Revenue Service on Tuesday announced it will resume mailing automated reminders of past due taxes to those who owe back taxes, something it had suspended doing in February 2022 due to pandemic-era backlogs.
But it also said it will offer failure-to-pay penalty relief to 4.7 million individuals, businesses and tax-exempt organizations, most of whom earn less than $400,000. Those are people who have previously received an initial tax collection notice, but not subsequent reminder notices.
“As the IRS has been preparing to return to normal collection mailings, we have been concerned about taxpayers who haven’t heard from us in a while suddenly getting a larger tax bill. The IRS should be looking out for taxpayers, and this penalty relief is a common-sense approach to help people in this situation,” said IRS Commissioner Danny Werfel. “We are taking other steps to help taxpayers with past due bills, and we have options to help people struggling to pay.”
Those who are eligible for the penalty relief will not need to do anything. The IRS will automatically apply it.
The penalty relief amounts to roughly $1 billion, or $206 per return, the agency estimates.
Penalty relief will only apply for those who owe less than $100,000 in past due taxes. And it only applies to tax debts owed for tax years 2020 and 2021.
And if you’ve already paid back taxes and penalties for 2020 or 2021, you may be eligible for automatic relief as well. The IRS will apply it as a refund or a credit.
The IRS said before it resumes sending out notices, it will send out a special reminder letter to those affected in January.
“The letter will alert the taxpayer of their liability, easy ways to pay and the amount of penalty relief, if applied. The IRS urges taxpayers who are unable to pay their full balance due to visit IRS.gov/payments to make arrangements to resolve their bill.
Lastly, Werfel urged anyone with a past due tax debt to address the situation as soon as possible, because failure-to-pay penalties will resume on April 1, 2024.
Note, however, that the relief only applies to failure-to-pay penalties, not to the interest that accrues on your tax debt. The IRS legally cannot waive interest that accrues on back taxes, Werfel said. And if you never filed a return for 2020 or 2021 and were required to, you will still be subject to a failure-to-file penalty.
