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Key Points:
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The IRS announces $1 billion in penalty relief for 4.7 million taxpayers affected by pandemic-related delays.
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Automatic adjustments will be made for eligible taxpayers, with an average savings of $206 per return.
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Relief includes special reminder letters, refunds for those who already paid, and continued support through IRS tools and services.
In a move that's sure to bring a collective sigh of relief, the Internal Revenue Service (IRS) just announced a whopping $1 billion in penalty relief. This grand gesture is set to benefit about 4.7 million individuals, businesses, and non-profits who've been grappling with back taxes during the pandemic. The best part? The majority of those who'll benefit make under $400,000 a year.
IRS's Billion-Dollar Gesture: A Pause That Refreshes
Remember those nerve-wracking automated collection reminders? Well, the IRS put them on hold since February 2022 due to COVID-19. This means many taxpayers didn't get those follow-up nudges about their overdue taxes. But don't get too comfortable - the penalties for late payment have still been ticking up.
The IRS isn't just resuming the usual process; they're adding a cherry on top!
What to Expect:
- Special Reminder Letters: Expect a friendly letter next month from the IRS, detailing your balance, easy payment options, and how much you'll save with this penalty relief.
- Automatic Adjustments: If you're eligible, the IRS will automatically tweak your account, starting with individual taxpayers and moving on to businesses, trusts, and non-profits.
- Who Gets What?: Nearly 70% of individuals benefiting from this relief earn under $100,000.
- The Golden Figure: $206 Savings Per Return
- The IRS estimates that about 5 million tax returns are in line for this relief. That's an average of about $206 back in your pocket per return!
Notice 2024-7PDF: The IRS Explains
Dive into the details with the IRS's Notice 2024-7PDF. It's your guide to understanding how they're cutting slack for taxpayers affected by the pandemic. Danny Werfel, IRS Commissioner, says it's all about being taxpayer-friendly. They're also introducing other measures to ease the burden for those with overdue taxes.
The best news? This relief is automatic - you don't need to lift a finger. And if you've already paid up, expect a refund or a credit against other tax liabilities.
Who's Eligible? It's for those with assessed tax under $100,000. This includes individuals, businesses, and non-profits that filed specific forms for 2020 or 2021 and were part of the IRS collection process.
What If You're Not on the List? Don't worry; there are other ways to get penalty relief. Check out options like the reasonable cause criteria or the First-Time Abate program on IRS.gov.
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Refunds and Credits
- Refunds: Starting now through January 2024, the IRS will send out refunds. Keep an eye on your tax transcript to track this.
- Special Reminder Notices: If you don't get a refund, you might receive an updated balance notice in early 2024.
Need Help? IRS Has Got Your Back
The IRS is all about helping out. They've got payment options and tools for managing unpaid taxes. Thanks to funding from the Inflation Reduction Act, things like the IRS Document Upload Tool, improved phone service, and helpful bots are at your service.
The Return of Collection Notices
Starting January 2024, those automated collection notices are making a comeback. But don't stress; the IRS plans to roll them out slowly.
What About Penalties and Interest?
- Late Filing Penalties: If you're late filing, you could face a 5% penalty per month, up to 25%.
- Failure-to-Pay Penalties: Missed the payment deadline? There's a penalty for that, too.
- Interest Charges: The IRS charges interest on unpaid balances, compounded daily. Keep an eye on IRS.gov for the latest rates.
The Bottom Line
The IRS is extending a helping hand to millions of taxpayers struggling in the post-pandemic era. With automatic relief measures, easy payment options, and helpful resources, managing your taxes just got a bit less daunting. So, take a deep breath, check out what the IRS has to offer, and remember, help is just a click away!
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Elinor Rozenvasser is a content writer and editor with a knack for finance. She holds a Bachelor's in Communications and Business from Reichman University, and has been swimming alongside finance specialists for over a decade. She's not your typical financial writer, though. She's more likely to use witty puns and sarcasm than jargon and technical terms. But don't let that fool you. She's still a whiz when it comes to explaining complex financial concepts in a way that anyone can understand. If there's any writer who can make finance fun and engaging, Elinor is your girl. She's sure to leave you laughing (and learning) long after you've finished reading her work.
