The IRS is automatically reimbursing some taxpayers who already paid the 'failure to file' penalty.
The Internal Revenue Service gets grouchy when people do not file their income taxes on time, either by skipping an extension request, filing after the extension deadline or not submitting their tax return at all.
Yet here’s something that might be a pleasant surprise: the IRS is giving a break to tardy taxpayers by waiving the failure to file penalty applied to returns for tax years 2019 and 2020. Dividing the number of eligible taxpayers by the sum, the average reimbursement could work out to be $750. But actual repayments will vary widely based on how the size of the tax debt and how late it was before the taxpayer filed.
O’Saben’s seen the results in his own tax practice. The IRS recently refunded one of his clients $69 for a 2019 return sent in after the deadline came and went on extensions. Remember what penalty is — and isn’t — being waived The IRS is giving a break on the failure to file penalty, but it is not applying the relief to the failure to pay penalty. Each penalty runs up to 25% of the unpaid tax, but the filing penalty racks up the more cash and sooner. This is why tax professionals constantly advise taxpayers to still file a return or at least submit an extension request during tax time to avoid the failure to file penalty.
Also remember, if taxpayers are due a refund, the IRS notes there’s no failure to file penalty. But people only have three years from the original filing due date to claim the refund. After that, it’s the government’s cash.
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