Californians who paid their 2019 or 2020 income taxes late could be getting refunds on the amounts they paid in penalties, the Internal Revenue Service said Wednesday.
The refunds or credits will be sent automatically — no application needed. Taxpayers should see the payments by the end of next month.
“If already assessed, penalties will be abated. If already paid, the taxpayer will receive a credit or refund,” the IRS notice said.
The agency said that about 1.6 million taxpayers across the country will automatically get more than $1.2 billion in refunds or credits. The period generally covers returns filed during the COVID pandemic.
The relief is not available in some instances, such as if a tax return was fraudulent, where the penalties are “part of an accepted offer in compromise or a closing agreement,” or where a court finally determined the penalties, the IRS said.
Those getting the relief were generally those who paid penalties because they filed late.
That penalty is usually assessed at a rate of 5% per month and up to 25% of the unpaid tax when a federal income tax return is filed late.
IRS decided to provide the relief as it tries to focus its efforts on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season. The agency has been under fire from consumers and Congress for its lagging taxpayer service.
“The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time. This penalty relief will be automatic for people or businesses who qualify; there’s no need to call,” said IRS Commissioner Chuck Rettig in a statement..”
Relief is also available to banks, employers and other businesses required to file various information returns, such as those in the 1099 series.
To qualify for relief, eligible 2019 returns must have been filed by Aug. 1, 2020, and eligible 2020 returns must have been filed by Aug. 1, 2021.
Because both of these deadlines fell on a weekend, a 2019 return will still be considered timely for purposes of relief provided under the notice if it was filed by Aug. 3, 2020, and a 2020 return will be considered timely for purposes of relief provided under the notice if it was filed by Aug. 2, 2021.
The 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,” IRS said.
