In Notice 2022-36, the IRS provides what many practitioners have wanted for years: penalty relief due to the COVID-19 pandemic. However, the relief granted does not apply to many commonly encountered penalties.
The IRS will automatically abate, refund, or credit the following penalties for tax years 2019 and 2020, provided that the return is filed on or before September 30, 2022:
§6651(a)(1) failure to file for the Form 1040 series (including Form 1040-NR, U.S. Nonresident Alien Income Tax Return), the Form 1041 series, the Form 1120 series, Form 1066, Form 990-PF, and Form 990-T.
§6038 failure to file for Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, when systematically assessed due to being attached to a late-filed Form 1065 or form 1120.
§6038A and §6038C failure to file for Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, when systematically assessed due to being attached to a late-filed Form 1065 or form 1120.
§6039F and §6677 failure to file for Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, and Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner (Under section 6048(b)) if assessed under the campus assessment program.
§6698(a)(1) failure to file and §6698(a)(2) failure to show required information for Form 1065.
§6699(a)(1) failure to file and §6699(a)(2) failure to show required information for Form 1120-S.
Additionally, the IRS will automatically abate, refund, or credit the §6721(a)(2)(A) failure to file penalty for §6724(d)(1) information returns (e.g., Form W-2 and almost all Forms 1099) filed by the following dates:
2019 returns filed on or before August 1, 2020, and
2020 returns filed on or before August 1, 2021.
The above relief will not apply to any return to which the §6651(f) fraudulent failure to file penalty or the §6663 fraud penalty applies, or penalties subject to an accepted offer in compromise or closing letter.
Any interest accrued on the penalties above should also be abated, refunded, or credited when the IRS removes the underlying liability.
The following are examples of penalties not covered by this notice and would need to be abated, refunded, or credited under existing procedures:
§6601 interest on underpayments,
§6651(a)(2) failure to pay penalty,
§6652 daily delinquency penalty for Form 990,
§6654 individual failure to make estimated tax payment penalty,
§6655 corporation failure to make estimated tax payment penalty,
§6656 failure to deposit penalty,
§6657 bad check penalty, and
§6662 accuracy-related penalty.
The §6651(a)(2) and §6656 penalties qualify for First Time Abate (Internal Revenue Manual §220.127.116.11.3.2.1); the remainder would require reasonable cause for abatement or refund.
Join me at the following in-person education events in 2022:
AICTP Tax Planning Academy - October 19-21, 2022 - San Diego, CA
CSEA - Central Coast Chapter - October 27-28, 2022 - Cambria, CA
Property Basis (2 CE); Tax Planning Strategies for Rental Owners (2 CE); §1031 Exchanges (2 CE); Debt Cancellation (2 CE); Circular 230 Ethics: Accepting Engagements (2 CE); Roth IRA Fundamentals (2 CE)
ASTPS Super Conference - November 2-4, 2022 - Orlando, FL
Mastering the Refund Statute of Limitations (2 CE)
Minnesota Society of Enrolled Agents - November 16, 2022 - Eagan, MN
Partnerships (2 CE); S Corporations (2 CE); C Corporations (2 CE); 2022 Business Update (2 CE)
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This is great! Any idea if they'll automatically reinstate FTA in the cases where the penalty was already abated that way?
Tom can you help with filing an amended 941X for when a owner officer of a corporation took the erc credit in 2020 and now needs to amend and pay it back. Geri