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Thursday, February 2, 2023

IRS to refund penalties for millions of taxpayers who filed late

Rep. Kevin Brady, R-Texas, examines what a bolstered IRS agency and more audits could mean for Americans on “Maria Bartiromo’s Wall Street.”

The Internal Revenue Service announced this week that it is sending refunds to more than a million Americans who filed their taxes late in the early days of the COVID-19 pandemic.

Nearly 1.6 million filers will automatically receive refunds or credits worth a collective $1.2 billion — an average of $750 per person. To qualify for the relief, Americans must have filed their individual tax returns by Sept. 30, 2022.

Typically, the IRS charges individuals who file returns late without an extension a failure-to-file penalty — an extra 5% per month on the unpaid amount, which can add up to 25% of the tax due. But the tax-collecting agency is waiving that fee for many individuals and businesses who filed returns for 2019 and 2020 late.

"The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time," IRS Commissioner Chuck Rettig said in a statement. "This penalty relief will be automatic for people or businesses who qualify; there's no need to call."

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Individual income tax

IRS 1040 Individual income tax forms for the 2018 tax year are shown. (Daniel Acker/Bloomberg via Getty Images / Getty Images)

Eligible tax returns include individual, corporate, estates and trusts, the IRS said. People who have been fined but who have not yet paid the penalty will see it eliminated, while individuals who already paid the late-file fee will get a refund or credit.

A majority of the refunds will be issued by the end of September, the agency said.

The announcement comes as the IRS continues to wade its way through a backlog of unprocessed tax returns. As of Aug. 12, the IRS still had 9.3 million unprocessed individual tax returns from 2022, including about 7.6 million paper returns.

The heap of unprocessed returns stemmed from pandemic-related disruptions, including a worker shortage, the herculean task of administering millions of stimulus checks, and adapting to other tax changes in the different COVID-19 relief packages, like boosted child tax credit payments.

Internal Revenue Service

The Internal Revenue Service headquarters in Washington, D.C., on Feb. 25, 2022. (Al Drago/Bloomberg via Getty Images / Getty Images)

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The IRS has laid out a goal to reach "healthy" levels of inventory by the end of 2022.

If you are still waiting for your refund, you can track its status using the IRS' Where’s My Refund tool.

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