IRS Resumes Automatic Collection Notices, Provides Failure-to-Pay Penalty and Accrued Interest Relief to Some by Angie Adames, CPA
Posted on February 22, 2024
by
Angie Adames
The IRS announced it is resuming mailing automated collections and reminder notices to taxpayers with outstanding tax liabilities from 2021 and earlier, a practice it suspended in 2022. In certain circumstances, the agency will waive failure-to-pay penalties that accrued in tax years 2020 and 2021 during the height of the COVID pandemic. It is estimated that this will provide $1 billion in penalty and interest relief to approximately 4.7 million taxpayers, including individuals, businesses, nonprofit entities, trusts and estates.
Background
Following the COVID-19 national state of emergency order issued in 2020, the IRS provided a series of tax relief measures to help taxpayers adversely affected by the pandemic, such as delaying tax deadlines, expanding tax credits and deductions and suspending debt collection activities. Two years later, the agency suspended the automatic mailings of collection reminders to reticent taxpayers and announced a program providing retroactive penalty relief to qualifying taxpayers who failed to file certain tax and information returns in a timely manner during the pandemic.
Qualifying for Relief from Accrued Penalties and Interest
As the IRS now resumes mailing taxpayers’ reminders of unpaid tax liabilities for tax years 2021 and earlier, it will provide failure-to-pay penalty relief to individuals, businesses, nonprofit entities, trusts and estates that meet the following criteria:
- The taxpayer’s assessed income taxes for tax years 2020 or 2021 is less than $100,000, excluding additions of tax, penalties and interest, and
- The taxpayer received an initial balance due notice (Notice CP14) between February 5, 2022 and December 7, 2023, for taxable years 2020 or 2021
This penalty relief applies only to taxpayers who failed to pay their tax liabilities, not to late payments. The relief is automatic, meaning taxpayers do not need to act to receive it. The IRS expects to issue refunds or credits to taxpayers who paid failure-to-file penalties and any due balance by March 31, 2024. After that date, penalties and interest will be assessed on outstanding balances. If you do not hear from the IRS in the next few weeks, it is crucial you reach out to your tax advisors. It is also important to recognize that the IRS offers taxpayers several options for meeting their annual income tax liabilities, including monthly payment plans and offers in compromise to settle tax debt for less than the total amount owed. Your CPA and tax advisor can help determine your eligibility for penalty relief and contact the IRS to initiate the process.
About the Author: Angie Adames, CPA, is a director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where she provides tax and consulting services to real estate companies, manufacturers and closely held entities. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.
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