The taxpayers do have to pay the underlying tax bill, just not the fees for failing to pay on time since the agency stopped sending reminders about overdue payments last year and many taxpayers might not have realized the fees were continuing to grow. IRS officials said Tuesday that they would start sending out notices reminding taxpayers of what they do owe, and notifying them if any of their penalties have been forgiven.
The savings to each taxpayer is about $200 on average, and the IRS said that almost 70 percent of individuals receiving the relief have household incomes below $100,000.
People who would have been eligible but have already paid their penalties for late payments of their 2020 or 2021 tax bills will get their money back, in the form of a refund or a credit toward another tax bill. Taxpayers don’t have to apply or claim it; the IRS will handle it.
Businesses or high-income individuals whose taxes for the year totaled more than $100,000 are not eligible for the penalty cancellation, the IRS said.
When the IRS stopped sending the notices about overdue bills in February 2022, it was working on correcting a massive backlog of tax returns that piled up during the pandemic. Since then, the agency has made progress on reducing the backlog of returns and returning to normal processing times.
Taxpayers who get one of the letters telling them that they owe money to the IRS can set up a payment plan if they don’t have the money to pay the bill right away. If they don’t either pay or enter a payment plan, they will start accumulating new late fees.
