New IRS Penalty Relief 2024

New IRS Penalty Relief 2024

In late December, the IRS started to apply new penalty relief for taxpayers who owe back taxes but did not receive automated collection reminder notices during the 2020-2021 pandemic period. This is a New Year’s gift for millions of individuals, businesses, and non-profit organizations with financial hardships and who struggled to pay taxes on time due to the challenging circumstances of the COVID-19 pandemic. Here is all the information you need to know about the new 2024 IRS penalty relief.

How Many Taxpayers Will Receive the New IRS Penalty Relief?

The 2024 IRS penalty relief helps approximately 4.7 million taxpayers, including individuals, businesses, and charities. Most of those benefiting from the new relief earn less than $400,000 a year.

What Will the Average Penalty Relief Amount Be?

The IRS is applying around $1 billion in 2024 penalty relief to five million qualifying tax returns. This equals an average of $206 in penalty relief per return.

Who Is Eligible for the New IRS Penalty Relief?

The IRS will give penalty relief to taxpayers with $100,000 or less in unpaid taxes and who meet these criteria:

  • Filed returns and owe for 2020 and 2021 taxes
  • Received a CP14 balance due notice but no follow-up reminders between February 5, 2022 to December 7, 2023

It is important to note that failure–to–file penalty fees resume April 1, 2024 even for individuals and businesses eligible for this new relief.

Do You Need to Apply for the New Penalty Relief or Submit an IRS Form?

No. This relief is automatically applied to eligible tax returns. The IRS will give relief to individuals first, and then businesses, between December 2023 and January 2024. If you run a trust, estate, or tax-exempt organization, expect to see the IRS relief applied to your tax account in late February 2024 or early March 2024.

How Will You Know the IRS Applied the New Penalty Relief to Your Tax Balance?

The IRS will mail special LT38 letters starting January 2024. This new reminder notice details each taxpayer’s balance, tax payment options, and the penalty relief amount applied.

Is the New IRS Penalty Relief Only for the Failure-to-Pay Penalty?

Yes. The new IRS penalty relief applies only to failure-to-pay penalties from the pandemic period. Starting in February 2022, the IRS suspended automated balance due reminders due to COVID-19.

The reminder notices are usually sent as a follow-up to the initial CP14 notice. Although automatic balance due notices were suspended, failure-to-pay penalties were still charged to delinquent taxpayers.

If You Paid a Failure-to-Pay Penalty for 2020-2021, Will the IRS Refund You the Penalty Amount?

It depends. If you have already paid a failure-to-pay penalty for a 2020 or 2021 tax return, the IRS will either refund the amount or use it to offset any unpaid taxes.

If You’re Not Eligible for the New Penalty Relief, What Other Tax Relief and IRS Settlement Options Can Help You Pay Off Taxes?

The IRS offers several tax relief and settlement options in addition to 2024 penalty relief for individuals who cannot fully pay their taxes.

Here are some of the common options available:

Installment Agreement

An installment agreement, or monthly payment plan, allows you to pay your tax debt in smaller amounts over more time.

Offer in Compromise

The OIC program helps you resolve your full tax debt for less than the original balance when you meet specific hardship criteria. If you request an offer settlement amount, you must show that paying the original amount would cause financial hardship and you would be unable to pay your full tax bill.

Currently Not Collectible status (CNC)

If you have a dire financial hardship and cannot pay any taxes whatsoever, the IRS may delay collection until your financial situation improves. While in CNC status, the IRS will stop collections.

Penalty Abatement

You can request the removal of penalties if you have a “reasonable cause” for missing the tax payment deadline. This could be due to a natural disaster, serious illness, or other unforeseen and unavoidable circumstance.

Innocent Spouse Relief

If you filed a joint tax return with your spouse and your spouse has a tax debt, you may qualify for innocent spouse relief. If eligible, this means you will not be responsible for your spouse’s back taxes.

If you owe the IRS unpaid taxes and do not qualify for the new penalty relief in 2024, we can help you find an IRS tax relief program to help resolve your tax issues.

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