WASHINGTON  ̶  To help struggling taxpayers affected by the COVID-19 pandemic, the Internal Revenue Service today issued Notice 2022-36,which provides penalty relief to most people and businesses who file certain 2019 or 2020 returns late.

The IRS is also taking an additional step to help those who paid these penalties already. Nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in refunds or credits. Many of these payments will be completed by the end of September.

Besides providing relief to both individuals and businesses impacted by the pandemic, this step is designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season.

“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. This penalty relief will be automatic for people or businesses who qualify; there’s no need to call.”

The relief applies to the failure to file penalty. The penalty is typically assessed at a rate of 5% per month and up to 25% of the unpaid tax when a federal income tax return is filed late. This relief applies to forms in both the Form 1040 and 1120 series, as well as others listed in Notice 2022-36, posted today on IRS.gov. 

To qualify for this relief, any eligible income tax return must be filed on or before Sept. 30, 2022.

In addition, the IRS is providing penalty relief to banks, employers and other businesses required to file various information returns, such as those in the 1099 series. To qualify for relief, the notice states that eligible 2019 returns must have been filed by Aug. 1, 2020, and eligible 2020 returns must have been filed by Aug. 1, 2021.

Because both of these deadlines fell on a weekend, a 2019 return will still be considered timely for purposes of relief provided under the notice if it was filed by Aug. 3, 2020, and a 2020 return will be considered timely for purposes of relief provided under the notice if it was filed by Aug. 2, 2021. The notice provides details on the information returns that are eligible for relief.

The notice also provides details on relief for filers of various international information returns, such as those reporting transactions with foreign trusts, receipt of foreign gifts, and ownership interests in foreign corporations. To qualify for this relief, any eligible tax return must be filed on or before Sept. 30, 2022.

Relief is automatic; most of $1.2 billion in refunds delivered to eligible taxpayers by next month

Penalty relief is automatic. This means that eligible taxpayers need not apply for it. If already assessed, penalties will be abated. If already paid, the taxpayer will receive a credit or refund.

As a result, nearly 1.6 million taxpayers who already paid the penalty are receiving refunds totaling more than $1.2 billion. Most eligible taxpayers will receive their refunds by the end of September.

Penalty relief is not available in some situations, such as where a fraudulent return was filed, where the penalties are part of an accepted offer in compromise or a closing agreement, or where the penalties were finally determined by a court. For details, see Notice 2022-36, available on IRS.gov.

This relief is limited to the penalties that the notice specifically states are eligible for relief. Other penalties, such as the failure to pay penalty, are not eligible. But for these ineligible penalties, taxpayers may use existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First Time Abate program. Visit IRS.gov/penaltyrelief for details.

“Penalty relief is a complex issue for the IRS to administer,” Rettig said. “We’ve been working on this initiative for months following concerns we’ve heard from taxpayers, the tax community and others, including Congress. This is another major step to help taxpayers, and we encourage those affected by this to review the guidelines.”

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from IRS website.

Some people may choose not to file a tax return because they didn’t earn enough money to be required to file but may miss getting a refund if they don’t file. While the filing deadline is October 17, 2022 to file 2021 tax returns, the IRS strongly encourages individuals to consider filing electronically sooner, rather than later, especially if they’re due a refund.

In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or can be claimed as a dependent of someone else. The Interactive Tax Assistant can help people determine if they need to file a tax return.

Look at tax withheld or paid. Excess tax withholdings are only returned in the form of a refund when someone files a tax return. This can affect students and part-time workers where the tax withheld from their wages is at a rate that is too high. Seniors and retirees who make estimated tax payments or have money withheld from their retirement fund and Social Security disbursements may also be eligible for a refund.

Individuals who answer yes to any of these questions, may be due a refund and must file a tax return to get their money.

• Did the taxpayer’s employer withhold federal income tax from their pay?
• Did the taxpayer make estimated tax payments during the tax year?
• Did they overpay last year on their taxes and have it applied to their 2021 tax?

Here are some valuable credits taxpayers may be able to claim. While most tax credits can be used to reduce the tax owed, there are credits that allow individuals to receive money beyond what they owe.

Recovery rebate credit. Individuals who didn’t qualify for a third Economic Impact Payment or got less than the full amount, may be eligible to claim the 2021 recovery rebate credit and will need to file a 2021 tax return even if they don’t usually file a tax return. The credit will reduce any tax owed for 2021 or be included in the tax refund.

Earned income tax credit. A working taxpayer who earned $57,414 or less last year could receive the EITC as a tax refund. For the 2021 tax year, the tax return taxpayers file in 2022, the earned income credit ranges from $1,502 to $6,728 depending on their filing status and how many children they claim on their tax return. Taxpayers who did not file a return for tax year 2020 or 2021 or who did not claim the earned income tax credit on their 2020 or 2021 return because they had no earned income in those years may file an original or amended return to claim the credit using their 2019 earned income if they are otherwise eligible to do so.

Taxpayers can also use their 2019 earned income to figure their 2021 earned income credit if their 2019 earned income is more than their 2021 earned income. They can check eligibility by using the EITC Assistant on IRS.gov, which is available in eight different languages.

Child tax credit or credit for other dependents. Taxpayers can claim the child tax credit if they have a qualifying child under the age of 18 and meet other qualifications. Other taxpayers may be eligible for the credit for other dependents. This includes people who have:

• Dependents who are age 17 or older.
• Dependents who have individual taxpayer identification numbers.
• Dependent parents or other qualifying relatives supported by the taxpayer.
• Dependents living with the taxpayer who aren’t related to the taxpayer.

This Interactive Tax Assistant tool on IRS.gov can help people determine if they qualify for these two credits.

Education credits. There are two higher education credits that can reduce the amount of tax someone owes on their tax return. One is the American opportunity tax credit and the other is the lifetime learning credit. The taxpayer, their spouse or their dependent must have been a student enrolled at least half time for one academic period to qualify. The taxpayer may qualify for one of these credits even if they don’t owe any taxes. Form 8863, Education Credits is used to claim the credit when filing the tax return.

From IRS site

Share this tip on social media — #IRSTaxTip: People without a filing requirement may miss out on a refund if they don’t file a 2021 tax return. http://ow.ly/geR750JWT0u

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WASHINGTON – The Internal Revenue Service today announced that spear phishing is the 8th item on the 2022 “Dirty Dozen” scams warning list and a serious problem because it can be tailored to attack and steal the computer system credentials of any small business with a client data base, such as tax professionals’ firms.

“Tax professionals generally relax a little after filing season and many take a well-deserved vacation but don’t let your IT defenses down,” said IRS Commissioner Chuck Rettig. “Spear phishing remains one of the biggest threats to the tax industry and other client-based enterprises.”

Spear phishing is an email scam that attempts to steal a tax professional’s software preparation credentials. These thieves try to steal client data and tax preparers’ identities in an attempt to file fraudulent tax returns for refunds. Spear phishing can be tailored to attack any type of business or organization, so everyone needs to be on the lookout and not rush to act when a strange email comes in.

The IRS has compiled the annual “Dirty Dozen” list for more than 20 years as a way of alerting taxpayers and the tax professional community about scams and schemes. The list is not a legal document or a literal listing of agency enforcement priorities. It is designed to raise awareness among a variety of audiences that may not always be aware of developments involving tax administration.

“Dirty Dozen” scams tend to be most prevalent during the filing season but criminals are busy all year long.

The IRS, state tax agencies and the nation’s tax community – working together as the Security Summit – continue to see an increase in this scheme attacking the tax professional community.

The latest phishing email uses the IRS logo and a variety of subject lines such as “Action Required: Your account has now been put on hold.” The IRS has observed similar bogus emails that claim to be from a “tax preparation application provider.” One such variation offers an “unusual activity report” and a solution link for the recipient to restore their account.

Emails claiming “Your account has been put on hold” are scams. The scam email will send users to a website that shows the logos of several popular tax software preparation providers. Clicking on one of these logos will prompt a request for tax preparer account credentials.

The IRS warns tax pros not to respond or take any of the steps outlined in the email. Similar emails include malicious links or attachments that are set up to steal information or to download malware onto the tax professional’s computer.

In this case, if recipients enter their credentials into the pop-up window, thieves can use this information to file fraudulent returns by using credentials that were provided by the tax professional. For more information, see IR-2022-36.

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Now that the April filing deadline has passed, most people are spending more time thinking about summer vacations than taxes. However, summer is a great time to review withholding and see if summer plans will affect next year’s tax return. Below are some common summertime tax situations and tips to help taxpayers figure out if they apply to their tax situation.

Getting married
Newlyweds should report any name change to the Social Security Administration. They should also report an address change to the United States Postal Service, their employers and the IRS. To report a change of address for federal tax purposes, taxpayers must complete Form 8822, Change of Address and submit it to the IRS. This will help make sure they receive the documents they will need to file their taxes.

Sending kids to summer day camp
Unlike overnight camps, the cost of summer day camp may count towards the child and dependent care credit.

Working part-time
While summertime and part-time workers may not earn enough to owe federal income tax, they should remember to file a return. They’ll need to file early next year to get a refund for taxes withheld from their checks this year.

Gig economy work
Taxpayers may earn summer income by providing on-demand work, services or goods, often through a digital platform like an app or website. Examples include ride sharing, delivery services and other activities. Those who do are encouraged to visit the Gig Economy Tax Center at IRS.gov to learn more about how participating in the gig economy can affect their taxes.

Normally, employees receive a Form W-2, Wage and Tax Statement, from their employer to account for the summer’s work. They’ll use this to prepare their tax return. They should receive the W-2 by January 31 next year. Employees will get a W-2 even if they no longer work for the summertime employer.

Summertime workers can avoid higher tax bills and lost benefits if they know their correct status. Employers will determine whether the people who work for them are employees or independent contractors. Independent contractors aren’t subject to withholding, making them responsible for paying their own income taxes plus Social Security and Medicare taxes.

Remember to file their tax return if they got an extension
People who requested an extension to October 17 or missed the April deadline should be sure to file their return. Many taxpayers can prepare and e-file tax returns for free with IRS Free File. MilTax online software is also available for the members of military and certain veterans, regardless of income. This software is offered through the Department of Defense. Eligible taxpayers can use MilTax to prepare and electronically file their federal tax returns and up to three state returns, for free.

Adjust withholding now to avoid tax surprises next year
Taxpayers can avoid a tax surprise next filing season by reviewing their withholding now. Life events like marriage, divorce, having a child, or a change in income can all affect taxes. The IRS Tax Withholding Estimator on IRS.gov helps employees assess their income tax, credits, adjustments and deductions and determine whether they need to change their withholding by submitting a new Form W-4, Employee’s Withholding Allowance Certificate. Taxpayers should remember that, if needed, they should submit their new W-4 to their employer, not the IRS.

Share this tip on social media — #IRSTaxTip: School is out for the summer, but tax planning is year-round https://go.usa.gov/xu6NY

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