The IRS will waive $1 billion in penalties for millions of taxpayers. Here's who qualifies.


The IRS is waiving penalties for people who failed to pay back taxes totaling less than $100,000 per year for tax years 2020 and 2021. The relief measure will waive $1 billion in fees for tax returns filed for those years , the IRS said. saying on Tuesday.

The tax agency said it is waiving the fees because of the disruption caused by the pandemic, which caused operational confusion at the IRS and caused a huge backlog of unprocessed tax returns. The relief is intended to resolve a dilemma caused by the tax agency's decision to suspend notices that taxpayers owed money. Although the IRS never sent the notices, penalties continued to increase for delinquent taxpayers.

While the IRS plans to resume sending normal collection notices, the announcement is intended as a one-time relief based on the unprecedented disruption caused by the pandemic, officials said.

“It was an extraordinary moment and the IRS had to take extraordinary measures,” IRS Commissioner Daniel Werfel told reporters. He said the change will be automatic for many taxpayers and will not require additional action.

Here's who qualifies

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

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If people paid the non-payment fine, they will receive a refund, Werfel said in a call with reporters. “People need to know that the IRS is on their side,” he said.

Most of the approximately 5 million tax-exempt individuals, businesses and organizations that will receive the relief earn less than $400,000 per year, the IRS said.

—With information from the Associated Press.

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