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The Internal Revenue Service (IRS) has waived $1.2 billion in taxpayer penalties and issued them as refunds instead. Approximately, 1.6 million taxpayers received $750 in refunds each.
Taxpayer Penalties Refunded
On August 24, 2022, the Internal Revenue Service (IRS) has announced that the penalties imposed against taxpayers who have failed to file their 2019 and 2020 tax returns on the deadline will be waived. In addition, IRS also issued more than $1.2 billion in refunds to taxpayers who received the penalties. Around 1.6 million taxpayers have automatically received the refunds in September 2022. Approximately, each taxpayer has received an average refund of $750.
According to Roberts, the penalty was calculated at 5% of unpaid taxes for every month that the return was filed late, with a maximum of 25%. The refunds were automatically received by those who qualify. This means that taxpayers did not apply for the refunds anymore. However, for those who have not paid the penalties, the refunds have been decreased. The IRS has previously extended the deadline for tax filing both in 2020 and 2021. However, when the IRS was faced with a huge backlog of tax returns, they decided to refund the penalties instead. This initiative helped the IRS focus on the backlogs and return to normal operations by 2023.
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Who is eligible for these refunds?
According to Roberts, to be eligible for the refunds, taxpayers must have filed 2019 or 2020 tax returns that were originally due in 2020 and 2021 by September 30 this year. Unfortunately, the IRS will not refund penalties if fraudulent returns were filed or if the penalties were accepted for a compromise or an agreement. On the other hand, the IRS provided refunds to employers, banks, and other businesses that were required to file different information returns.
2019 tax returns must have been filed by August 1, 2020 and 2020 tax returns must have been filed by August 1, 2021. However, because both of these deadlines were on a weekend, the 2019 tax return became eligible for the refunds if it was filed by August 3, 2020. 2020 tax returns became eligible if it was filed by August 2, 2021.
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