The IRS has restarted sending automated collection notices, ending a two-year hiatus due to the COVID-19 pandemic.
The IRS temporarily suspended the mailing of automated reminders to pay overdue tax bills back in February 2022. Affected taxpayers would have received an initial tax letter regarding taxes due but no follow-up reminders. Reinstated “special reminders” started going out in January, alerting taxpayers of their remaining tax liabilities.
Although reminders were suspended in the interim, the failure-to-pay penalty continued to accrue for taxpayers who did not fully pay their bills in response to the initial balance due notice. It’s resulted in some sticky situations for taxpayers, some who owe for tax years 2020 and 2021 but who have not received a notice from the IRS in more than a year.
In response, the IRS has announced new penalty relief for approximately 4.7 million individuals, businesses and tax-exempt organizations that were not sent automated collection reminder notices during the pandemic. According to the IRS, most of those receiving penalty relief make under $400,000 a year. Nearly 70% of the individual taxpayers receiving penalty relief have income under $100,000 per year.
“Eligible taxpayers who already paid their full balance will benefit from the relief, too; if a taxpayer already paid failure-to-pay penalties related to their 2020 and 2021 tax years, the IRS will issue a refund or credit the payment toward another outstanding tax liability,” the agency announced.
The IRS has stated that any applicable relief is automatic and included in the special reminder letters that have started going out. You can also view your tax transcript to see if automatic relief has been applied as a refund or credit. If you do not receive a refund, you should also receive a special reminder with your assessed balance. Taxpayers with questions on penalty relief can contact the IRS after March 31, 2024.
Another important date: The failure-to-pay penalty will resume on April 1, 2024. Anyone with outstanding bills and accumulating penalties not covered by this special relief may be able to use existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First-Time Abatement program. Visit IRS.gov/penaltyrelief for details, and feel free to contact us with questions.
