The Internal Revenue Service (IRS) will waive penalty fees for people who failed to pay back taxes that total less than $100,000 per year for tax years 2020 and 2021. This is a one-time relief based on the unprecedented interruption caused by the pandemic, according to the IRS.

The IRS says an estimated 5 million people, businesses and tax-exempt organizations — most making under $400,000 per year — will be eligible for the relief starting this week. That totals about $1 billion, the agency said. Those who paid the failure-to-pay penalty will get a refund. The waiver (or refund) will be automatic for many taxpayers and will not require additional action.

Taxpayers are eligible for automatic relief if they filed a Form 1040, 1041, 1120 series or Form 990-T tax return for years 2020 or 2021, owe less than $100,000 per year in back taxes, and received an initial balance-due notice between February 5, 2022 and December 7, 2023. 

The IRS temporarily suspended mailing automated reminders to pay overdue tax bills during the pandemic, beginning in February 2022, and agency leadership says the pause in automated reminders is a reason behind the decision to forgive the failure-to-pay penalties.

For additional information on this or other tax topics, please contact Gray, Gray & Gray at 781.407.0300.