IRS Penalty Relief and the End of the Pandemic Related Pause

Date January 19, 2024

As part of the Inflation Reduction Act, the IRS announced in Notice 2024-7 that almost $1 billion in failure-to-pay penalty relief will be provided for approximately 4.7 million taxpayers who were not sent automatic collection reminder notices during the pandemic. This relief has been automatically applied to impacted taxpayers starting now through late March.

Individuals, businesses, trusts, estates, and tax-exempt organizations qualify if they submitted specific Forms 1040, 1120, 1041, and 990-T income tax returns for the 2020 or 2021 tax years, had an assessed tax amounting to less than $100,000, and were either in the IRS collection notice process or received an initial balance due notice between Feb. 5, 2022, and Dec. 7, 2023. Taxpayers who do not qualify for automatic relief may still seek relief under existing relief procedures including reasonable cause criteria and the First-Time Abate program. If the relief results in a refund or credit, based on the originally filed return, the taxpayer will notified via letter and able to view it on their transcripts by the end of January.

In February of 2022, the IRS paused the automated reminders for tax debts due to the overwhelming amount of paper-filed returns and letters received from the IRS that were unprocessed. Starting in January, the IRS will resume sending automated collection notices to individuals with tax debts before the 2022 tax year. All other taxpayers will begin receiving collection notices for tax debts before the 2023 tax year. Taxpayers started receiving notices for more current tax debts in the last few months as the first steps for the IRS returning to business as usual. The first round of these letters will be issued to remind taxpayers of their tax liability and the opportunity to address the tax issue before the next round of letters are issued.

If you receive a letter from the IRS, be sure to pass it along to your HBK representative so we can assist you in any way we can.

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