Starting in January 2024 the IRS will start sending out special reminder letters to certain eligible individuals and businesses who have unpaid tax bills. These letters will go to those who had unpaid tax bills during 2020 and 2021 that did not receive IRS notices due to the temporary pause the IRS put on automated mailing notices during the COVID-19 pandemic.
During the COVID-19 pandemic, the IRS temporarily halted the automated mailing of notices to pay overdue tax bills, leaving millions of people unaware of their current tax situation. The IRS will be waiving failure-to-pay penalties accrued on these tax bills during 2020 and 2021 tax years, providing approximately $1 billion in penalty relief to taxpayers collectively.
The purpose of these special reminder letters is to alert the taxpayer of their liability, easy ways to pay the liability and the amount of penalty relief the IRS is granting them. This new penalty relief opportunity will be available to approximately 4.7 million individuals, businesses, and tax-exempt organizations who were not sent collection notices during the pandemic pause.
To receive the penalty relief, individuals and businesses do not need to take any action. The IRS has already begun adjusting eligible individual accounts and will follow with eligible business accounts. However, any unpaid amounts due still need to be paid or penalties will resume on April 1, 2024 for eligible taxpayers.
Any eligible taxpayers who have already paid their full balance, including any failure-to-pay penalties related to their 2020 and 2021 tax years, will still benefit from the penalty relief in the form of a tax refund. In this case, the IRS will either issue a refund or credit the payment towards another outstanding tax liability, if any.
Eligibility for the failure-to-pay penalty relief is based on income levels. Taxpayers are eligible if they have been assessed less than $100,000 in tax liability. This criterion is applied separately for each return and each entity. Eligible taxpayers include individuals, businesses, trusts, estates and certain tax-exempt organizations that were either issued an initial balance-due notice or were in the IRS collection notice process between February 5, 2022 and December 7, 2023.
Taxpayers’ ineligible for the penalty relief still have options under existing penalty relief procedures. If you have any questions regarding penalty relief, eligibility, or need a tax attorney to help pay a balance and fight penalties, reach out to the tax attorneys at Hone Maxwell!