In response to logistical hardships imposed by the COVID-19 pandemic, on August 24, 2022, the IRS released Notice 2022-36 in its Internal Revenue Bulletin providing relief of penalties relating to the failure to file certain international informational returns for the 2019 and 2020 tax years. The relief 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. To qualify for this relief, any eligible income tax return must be filed on or before September 30, 2022.
Penalty relief is automatic. This means that eligible taxpayers need not apply for it. If already assessed, penalties will be abated. If already paid, the taxpayer will receive a credit or refund.
The penalties listed below of this Notice will be automatically abated, refunded, or credited, as appropriate without any need for taxpayers to request this relief:
Additions to tax under section 6651(a)(1) for failure to file the following income tax returns:
- Form 1040, Form 1040-C, Form 1040-NR, Form 1040-NR-EZ, Form 1040 (PR), Form 1040-SR, and Form 1040-SS;
- Form 1041, Form 1041-N, and Form 1041-QFT;
- Form 1120, Form 1120-C, Form 1120-F, Form 1120-FSC, Form 1120-H Form 1120-L, Form 1120-ND, Form 1120-PC, Form 1120-POL, Form 1120-REIT, Form 1120-RIC, and Form 1120-SF;
- Form 1066; and
- Form 990-PF and Form 990-T.
Certain penalties under sections 6038, 6038A, 6038C, 6039F and 6677 for failure to timely file the following international information returns:
- Penalties systematically assessed when a Form 5471 and/or Form 5472, as attached to a late-filed Form 1120 or Form 1065; and
- Penalties assessed by the campus assessment program with respect to filings on Form 3520 and on Form 3520-A.
Penalties under section 6698(a)(1) for failure to timely file and under section 6698(a)(2) for failure to show the required information on a Form 1065.
Penalties under section 6699(a)(1) for failure to timely file and under section 6699(a)(2) for failure to show the required information on a Form 1120-S.
Penalty relief is not available in some situations, such as where a fraudulent return was filed, where the penalties are part of an accepted offer in compromise or a closing agreement, or where the penalties were finally determined by a court. This relief is limited to the penalties that the notice specifically states are eligible for relief. Other penalties, such as the failure to pay penalty, are not eligible.
If you have any questions about our team or any global business or compliance issue, do not hesitate to reach out.
Jason Rauhe, CPA is a Principal in the firm’s Global Business Services practice and is responsible for assisting clients and adding depth in all areas of the firm’s international tax consulting services including transfer pricing, and the firm’s compliance expertise.
Rauhe previously served as Director of International Tax at a Top 100 CPA Firm, where he was responsible for the firm’s international tax division and major industry alliance networks.