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IRS Resumes Collection Notices: Navigate Penalty Relief and Tax Obligations

The COVID-19 pandemic brought significant changes to various aspects of life, including tax administration. One such change was the IRS’s temporary suspension of automated collection notices for overdue tax bills starting in February 2022. While this provided some relief to taxpayers, it also left many with questions about their outstanding balances. As we move into 2024, the IRS has announced the resumption of collection notices, marking a new chapter in tax enforcement.

Why the Resumption of Notices?

The hiatus in notices meant that taxpayers who hadn’t fully paid their bills after the initial notice were still accruing penalties. With the reinstatement of collection notices, the IRS aims to address this and provide clarity to taxpayers regarding their outstanding liabilities.

A Gentle Reminder with Relief in Sight

Some taxpayers may be surprised to receive these reminder letters, especially if they haven’t heard from the IRS in over a year. However, the initial correspondence is designed to be a gentle nudge, outlining the outstanding balance, convenient payment options, and crucially, details about penalty relief.

Penalty Relief: A Helping Hand for Many

Penalty relief is a key aspect of the IRS’s approach to this situation. Eligible taxpayers may benefit from the waiver of failure-to-pay penalties for tax years 2020 and 2021. This relief is estimated to impact millions of taxpayers, resulting in potential savings of around $1 billion collectively.

Who Qualifies for Penalty Relief?

Eligibility criteria include:

  • Assessed income tax for tax year 2020 or 2021 not exceeding $100,000 as of December 7, 2023 (excluding penalties and interest).
  • Receipt of an initial balance due notice on or before December 7, 2023, for tax year 2020 or 2021.
  • Incurred failure-to-pay penalties during the relief period for an eligible return.

Important Note: This relief is automatic, meaning eligible taxpayers don’t need to take any action to avail themselves of it. Even those who have already paid their full balance will benefit, with the IRS issuing refunds or applying credits to other outstanding tax liabilities.

Who is Eligible?

Taxpayers falling under the eligibility criteria include individuals, businesses, trusts, estates, and tax-exempt organizations who filed certain tax returns for tax years 2020 or 2021, with an assessed tax of less than $100,000, and were part of the IRS collection notice process between Feb. 5, 2022, and Dec. 7, 2023. Remember, the $100,000 limit applies separately to each return and entity.

Alternative Options for Relief

While many taxpayers qualify for automatic relief, others may not. In such cases, alternative options exist, such as applying for relief under reasonable cause criteria or the First-Time Abate program.

Seeking Assistance: We’re Here to Help

If you have outstanding liabilities from 2020 and/or 2021, don’t hesitate to reach out for assistance. We can explore various avenues to resolve your debt, including:

  • Installment agreements with the IRS
  • Negotiating an offer-in-compromise to settle the debt for less than the amount owed

Remember, you’re not alone in this. Understanding your options and eligibility for penalty relief is crucial in navigating this phase of tax enforcement. If you have any questions or require assistance, we’re here to help.

JS Morlu LLC is a top-tier accounting firm based in Woodbridge, Virginia, with a team of highly experienced and qualified CPAs and business advisors. We are dedicated to providing comprehensive accounting, tax, and business advisory services to clients throughout the Washington, D.C. Metro Area and the surrounding regions. With over a decade of experience, we have cultivated a deep understanding of our clients’ needs and aspirations. We recognize that our clients seek more than just value-added accounting services; they seek a trusted partner who can guide them towards achieving their business goals and personal financial well-being.
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