Federal Penalty Relief for Certain 2019 and 2020 Tax Returns Filed on or Before September 30, 2022

Penalties for failure to make a timely payment of the tax due, as well as interest thereon, are not being waived. In addition to providing relief to both individuals and businesses impacted by the COVID-19 pandemic, the relief in Notice 2022-36 is intended to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help it return to its normal operations for the 2023 filing season.

The most notable penalties and returns within the scope of this relief include penalties for the failure to file individual income tax returns, corporation income tax returns, partnership income tax returns, and estate and trust income tax returns. However, Notice 2022-36 specifically states that relief does not apply to cases of fraud, penalties in an accepted offer in compromise, penalties settled in a closing agreement, or penalties finally determined in a judicial proceeding.

The penalties and returns eligible for relief under Notice 2022-36 include:

1. Additions to tax under Section 6651(a)(1) of the Internal Revenue Code for the failure to file the following income tax returns: 

• Individual Income Tax Returns (Forms 1040, 1040-C, 1040-NR, 1040-NR-EZ, 1040 (PR), 1040-SR, and 1040-SS);
• Fiduciary Income Tax Returns (Forms 1041, 1041-N, and 1041-QFT);
• Corporate Income Tax Returns (Forms 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, and 1120-SF);
• Real Estate Mortgage Investment Conduit (REMIC) Income Tax Returns (Forms 1066); and
• Private Foundation and Exempt Organization Business Income Tax Returns (Forms 990-PF and 990-T).

2. Penalties under Code Sections 6038, 6038A, 6038C, 6039F, and 6677 for failure to timely file the following information returns:

• Forms 5471, 5472, 3520, and 3520-A.

3. Penalties under Code Section 6698(a)(1) for failure to timely file, and under Code Section 6698(a)(2) for failure to show required information on, Forms 1065 (partnership income tax returns).

4. Penalties under Code Section 6699(a)(1) for failure to timely file, and under Code Section 6699(a)(2) for failure to show required information on, Forms 1120-S (S corporation income tax returns).

5. Penalties under Code Section 6721(a)(2)(A) for failure to timely file the following information returns, as defined in Code Section 6724(d)(1) (e.g., Forms 1099):

• 2019 information returns that were filed on or before August 1, 2020 (with an original due date of January 31, 2020), February 28, 2020 (if filed on paper) or March 31, 2020 (if filed electronically), or March 15, 2020; and
• 2020 information returns that were filed on or before August 1, 2021 (with an original due date of January 31, 2021), February 28, 2021 (if filed on paper) or March 31, 2021 (if filed electronically), or March 15, 2021.