Following the COVID-19 pandemic, the IRS temporarily suspended certain collection activities. However, as of 2024, these restrictions have been lifted, and the agency is now actively pursuing the collection of unpaid taxes again. If you have any outstanding tax debt, it’s important to address it promptly to avoid penalties or interest.
Penalty Relief
At the end of 2023, the IRS announced they would be providing about $1 billion in penalty relief, mostly to those who make under $400,000 a year, with nearly 70% going to taxpayers with income under $100,000 per year.
Starting in 2022, the IRS temporarily suspended the mailing of automated reminders to pay overdue tax bills. However, the failure-to-pay penalty continued to accrue for those taxpayers who did not pay their bills in response to the initial balance due notice.
Early in 2024, however, the IRS waived failure-to-pay penalties for eligible taxpayers affected by this situation for tax years 2020 and 2021.This represents $1 billion in taxpayer savings, or about $206 per return. This penalty relief was applied automatically, meaning eligible taxpayers didn’t need to take any action to get it. If an eligible taxpayer has already paid failure-to-pay penalties related to their 2020 and 2021 tax years, the IRS issued a refund or credit the payment toward another outstanding tax liability.
Other Options
The failure-to-pay-penalty resumed on April 1, 2024, for all taxpayers. But even those taxpayers not eligible for automatic relief have options, like penalty relief procedures like applying for relief under the reasonable cause criteria or the First-Time Abate program. Yes, the IRS is now back to full collections, but that doesn’t mean there aren’t options for dealing with tax debt.
If you have a tax debt with the IRS, a question about penalties or interests, or any doubts about what kind of relief might apply to you, contact the experts at Highland Tax Resolution. Dealing with the IRS by yourself is often a stressful business, but we have the experience and the knowledge to advise you on the best course of action, not just in the short term, but the one that will give you peace of mind long-term.