Today, the IRS issued Notice 2022-36.  The notice announces the IRS’s intention to automatically waive failure-to-file penalties for many return types for tax years 2019 and 2020, provided the returns are filed on or before September 30th.

What Types of Returns are Covered?

The automatic relief for failure-to-file penalties assessable under Section 6651(a)(1) are available for the following return types for tax years 2019 and 2020:

- Form 1040 series of returns, including Form 1040, 1040-C, 1040-NR, 1040-NR-EZ, 1040 (PR), Form 1040-SR, and Form 1040-SS.

-Form 1041 series of returns, including Form 1041, Form 1041-N, and Form 1041-QFT

-Form 1120 series of returns, including Form 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, and 1120-SF

- Form 1066

- Form 990-PF and 990-T

Relief from failure to file penalties under sections 6038, 6038A, 6038C, 6039F and 6677 is available for the following return types for tax years 2019 and 2020:

- Systemic late-filing penalties assessed for a late filed Form 5471 or 5472.

- Campus assessment program penalties for late filed Forms 3520 and 3520-A.

Relief from penalties for failure to timely file and provide required information on Forms 1065 (Partnership Returns) and Forms 1120-S (S-Corporation Returns) is also available.

Relief is also provided for penalties for failing to file informational returns (1099s, 1095s, etc.), however, in order to be eligible for relief, 2019 informational returns must have been filed by August 01, 2020 and 2020 informational returns must have been filed prior to August 01, 2021. 

Do the automatic abatement provisions apply to failure-to-pay penalties or interest?
No, the automatic relief provided in the notice does not apply to failure-to-pay penalties or interest assessments, though interest assessed on the failure-to-file penalties should be recalculated and reduced in kind.  Relief from failure-to-pay penalties is still available via a reasonable cause abatement request.

Do I need to do anything to request abatement?

No, the notice indicates that penalty relief will be automatic.  If the IRS has not already assessed the penalties, they will not assess the penalties going forward.  If the penalties have already been assessed, the IRS will abate the penalties automatically, and issue a refund or credit amounts already paid, as appropriate.  The IRS reports that they expect many of the refunds from abated penalties to be issued by the end of September: 

What if I haven’t filed my 2019 or 2020 return yet?

With the exception of the informational returns described under Section 6724(d)(1), there is still time to prepare and submit returns for 2019 and 2020 and avoid a failure-to-file penalty assessment.  This is, to my knowledge, an unprecedented step by the IRS and affords a great opportunity for taxpayers to come back into compliance while avoiding costly failure-to-file penalties.  However, in order to be eligible for relief, the returns must be filed by September 30, 2022, so time is limited.  If you have unfiled returns for 2019 or 2020, you’d be well served to get the returns prepared and submitted before the September 30 deadline.  Even if you can’t afford to pay the balance due with the returns immediately, the IRS has a number of collection alternatives that can help you pay the liability over time while still avoiding costly failure-to-file penalties.