An unexpected notification from the Internal Revenue Service in a mailbox brings feelings of dread for any taxpayer. They fear opening the envelope and reading what they believe to be dire news that will result in a serious bill with potential penalties.
Those getting a particular notification in the coming weeks will be surprised, particularly filers who sent their returns late during the worldwide COVID-19 pandemic. More than 1.6 million Americans will be eligible for refunds, not bills, courtesy of the IRS.
Stripping away penalties
In a so-called “normal” environment, tax filers who are late and did not request an extension usually pay penalties of up to 25 percent of the tax amount they owe. For 2019 and 2020 returns, those penalties will be suspended. Taxpayers who already covered their fine will receive refunds. The total payout will be $1.2 billion. The average per person will be $750.00.
The IRS recognizes the unprecedented need to help taxpayers still financially struggling due to the pandemic, noting their responsibility for sending out federal stimulus payouts. The agency will also benefit as the initiative will help overcome its uphill battle courtesy of a significant backlog of unprocessed returns. By eliminating punitive measures for late filing, they can focus on their backlog with a hopeful “return to normal by the 2023 tax season.
Most refunds will be arriving by the end of September. Taxpayers have until that day to file their 2019 and 2020 returns to receive the IRS’ one-time benefit.