IRS to waive $1B in penalties for 2020-21 back taxes

WASHINGTON — The IRS said Tuesday it is going to waive penalty fees for people who failed to pay back taxes that total less than $100,000 per year for tax years 2020 and 2021.

Nearly 5 million people, businesses and taxexempt organizations will be eligible for the relief, which totals about $1 billion, the agency said.

The IRS temporarily suspended mailing automated reminders to pay tax bills during the pandemic and agency leadership said the pause in automated reminders is a reason behind the decision to forgive the failureto-pay penalties.

“Due to the ... effects of the COVID-19 pandemic, these reminders would have normally been issued ... after the initial notice,” the IRS said in a statement.

“Although these reminder notices were suspended, the failure-topay penalty continues to accrue for taxpayers who did not fully pay their bills in response to the initial balance due notice.”

While the IRS plans to resume sending out normal collection notices, the announcement is meant as one-time relief based on the interruption caused by the pandemic.

“It was an extraordinary time and the IRS had to take ... steps,” IRS Commissioner Daniel Werfel told reporters. He said the change will be automatic for many taxpayers and not require any action.

Taxpayers are eligible for automatic relief if they filed a Form 1040, 1041, 1120 series or Form 990-T tax return for years 2020 or 2021, owe less than $100,000 per year in back taxes, and received an initial balance-due notice between Feb. 5, 2022 and Dec. 7, 2023.