The Internal Revenue Service (IRS) announced on Aug. 24 that it will waive penalties levied against American taxpayers who failed to file their 2019 and 2020 returns in a timely manner during the COVID-19 pandemic.
The agency will also issue over $1.2 billion in refunds or credits to taxpayers who received the fees.
According to the IRS, roughly 1.6 million taxpayers, including individuals and businesses, will automatically receive the billions in refunds or credits by the end of September. Spread across 1.6 million taxpayers evenly, that would amount to an average refund of $750 per taxpayer.
The penalty relief is automatic for people or businesses who qualify, meaning taxpayers won’t have to apply for it.
For those who haven’t yet paid fines, the penalties will be abated.
The agency previously extended the tax filing deadline in both 2020 and 2021 to give taxpaying individuals and businesses more time to pay what they owed amid the COVID-19 outbreak.
“Throughout the pandemic, the IRS has worked hard to support the nation and provide relief to people in many different ways,” said IRS Commissioner Chuck Rettig. “The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time.”
The decision comes as the agency faces a huge backlog of tax returns and taxpayer correspondence prompted by the pandemic. The IRS said the move will help them to focus resources on addressing those backlogs and return to normal operations for the 2023 filing season.
Who Qualifies?
A failure-to-file penalty is charged when taxpayers do not file their return by the due date; the fine is a percentage of the taxes that weren’t paid on time. It is calculated at 5 percent of unpaid taxes for each month or part of a month that the return is filed late, up to a maximum of 25 percent.
