When many of us think about the Internal Revenue Service, it’s often associated with a frown, contemplating our annual taxes or, attempting to contact them by phone.
However, even this formidable government organization can exhibit holiday spirit, as demonstrated on December 19 when it announced approximately $1 billion in penalty relief for 4.7 million individuals, primarily those earning less than $400,000 annually.
While the notion of the IRS embracing Christmas cheer may seem unexpectedly heartwarming, there’s a solid rationale behind the gesture.
The IRS temporarily halted the mailing of automated reminders for overdue tax bills from February 2022 due to the unprecedented effects of the COVID-19 pandemic.
These reminders, usually sent as a follow-up after the initial notice, were suspended.
Despite this suspension, the failure-to-pay penalty continued to accumulate for taxpayers who didn’t fully settle their bills in response to the initial notice, as stated in a press release.
In light of this “unusual situation,” the IRS will also waive failure-to-pay penalties for tax years 2020 and 2021, with an estimated savings of about $206 per return for taxpayers. Eligible individual accounts have already been adjusted, and adjustments for business accounts are expected between late December and early January. Trusts, estates, and tax-exempt organizations will see adjustments from late February to early March 2024.
IRS Commissioner Danny Werfel emphasized the agency’s concern for taxpayers who might suddenly face a larger tax bill after not hearing from them for a while. The penalty relief is seen as a practical approach to assist individuals in this situation, with additional measures in place to help those struggling to pay past-due bills.
