Will penalty relief be extended?

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The recently announced late filing relief was extended to millions of returns from 2019 and 2020. If late filed returns are filed by Sept. 30, taxpayers will receive automatic relief from the late filing penalties associated with the returns.

Interest and underpayment penalties may still apply. Returns that had previously been filed that met the criteria for the relief will be entitled to refunds of the penalty starting this month.

The point of the relief was not just to assist taxpayers who struggled with many tax law changes and long wait times with the IRS during the pandemic but providing the automatic relief also relieved the IRS of the tremendous burden that was administering the penalties.  

But the Association of International Certified Professional Accountants (AICPA) doesn’t agree with the Sept. 30 deadline and is actively advocating for this relief to be extended to the end of the year. The institute noted that tax practitioners have already struggled to meet the demands of tax law changes, and to require the filing of 2019 and 2020 returns by Sept. 30, amid extension deadlines for 2021, would be an “insurmountable burden for most practitioners.”

In addition, AICPA has noted that many impacted taxpayers also deal with complex international reporting requirements, adding a layer of complication. Taxpayers living abroad would likely struggle to meet the quick turnaround time to be eligible for relief, which ultimately would not relieve the IRS of the administrative duties of having to later process those penalties.

The institute is adamant that extending the relief deadline to Dec. 31 allows taxpayers to meet the requirements without overburdening practitioners, effectively achieving the original goal.

Practitioners should operate using the assumed Sept. 30 filing deadline for the time being, but it is hopeful in the coming weeks that the relief will be extended to allow more time for taxpayers to take advantage before the end of the year.

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