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Reminder: File 2019 and 2020 returns by Sept. 30 to get COVID penalty relief

Written on Sep 23, 2022

The IRS reminded struggling individuals and businesses affected by the COVID-19 pandemic, that they may qualify for late-filing penalty relief if they file their 2019 and 2020 returns by Sept. 30, 2022. 

Besides providing relief to both individuals and businesses impacted by the pandemic, this step is designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season. 

The relief, announced last month, applies to the failure-to-file penalty. The penalty is typically assessed at a rate of 5% per month, up to 25% of the unpaid tax, when a federal income tax return is filed late. This relief applies to forms in both the Form 1040 and 1120 series, as well as others listed in Notice 2022-36, posted on IRS.gov. 

For anyone who has gotten behind on their taxes during the pandemic, this is a great opportunity to get caught up. To qualify for relief, any eligible income tax return must be filed on or before Sept. 30, 2022. 

Those who file during the first few months after the Sept. 30 cutoff will still qualify for partial penalty relief. That’s because, for eligible returns filed after that date, the penalty starts accruing on Oct. 1, 2022, rather than the return’s original due date. Because the penalty accrues, based on each month or part of a month that a return is late, filing sooner will limit any charges that apply. 

Unlike the failure-to-file penalty, the failure-to-pay penalty and interest will still apply to unpaid tax, based on the return’s original due date. The failure-to-pay penalty is normally 0.5% (one-half-of-one percent) per month. The interest rate is currently 5% per year, compounded daily, but that rate is due to rise to 6% on Oct. 1, 2022.