PODCAST: Will you benefit from IRS Penalty Relief and Automatic Forgiveness in 2024?

Will You Benefit From Irs Penalty Relief And Automatic Forgiveness In 2024

Written by Jeff Dvorachek

January 18, 2024

Welcome to the Tax Insights Podcast, where we break down complex tax topics into bite-sized how-tos. In this episode of Tax Insights Podcast, Jeff Dvorachek unravels a significant move by the IRS that took place in December 2023. Join us as Jeff explores the details of the IRS’s penalty relief for millions of Americans, examining its impact, the criteria for forgiveness, and the automatic refund process.

Stay tuned to understand how this decision, rooted in COVID-19 challenges, affects taxpayers and why some may find themselves receiving unexpected late Christmas gifts!

Host: Hey Jeff, on today’s program, we want to talk about something that the IRS did back at the end of 2023, back in December.

Jeff: You’re talking about an IRS penalty relief for several million Americans.

Host: That’s right. So, in like you said, in late December, what the IRS did is they essentially gave penalty relief on nearly 5 million returns from 2020 and 2021. And this is some of the COVID related things. You know, at that point, the IRS was not sending out some notices, and so people weren’t paying their bills, and so they received some late payment penalties, and the IRS decided now that they’re going to forgive some of those.

Host: So, how do they decide who to forgive? How qualified? Walk us through all that stuff because this is impacting, like we said, millions of Americans.

Jeff: Yeah, it really does because what happened is back in February of 2022, the IRS basically stopped sending out mailings with reminders of people that owed taxes for the years 2020 and 2021. And, you know, as we know, Terry, you know, even if we know we owe taxes if we don’t get that reminder bill from the IRS.

Host: Sure.

Jeff: Sometimes those don’t get paid.

Host: Right. So what the IRS did is they said okay since we stopped sending you reminder letters, we’re just going to go ahead and forgive any interest during that period, you know, knowing that you may have forgotten about them or just not paid them or whatever. The IRS is doing this automatically. So they’re taking bills that people have that maybe they paid or maybe they haven’t paid, and they’re just forgiving those penalties and interest.

Host: It’s a little frustrating, shall I say maybe, for those that then paid their bills, paid the interest, and now the IRS comes back and says well for those that didn’t we’re going to wipe it clean. I mean, like it feels a little you got penalized if you follow the rules.

Jeff: Well, that’s right. So if you follow the rules and you didn’t get any penalties, obviously you did it the right way. But one of the things that the IRS also said is that if you went ahead and paid your bills during this time and there were penalties associated with that, that they’re going to even refund those penalties that you’ve already paid to make those people also hold.

Host: Okay. I think that then is a big factor in this because, again, sometimes it’s unfortunate for those that follow the rules, make the payments, and then for those that don’t, and all of a sudden hey, you don’t have to pay it. But that’s not necessarily the entirety of this.

Jeff: And that’s exactly right. So what happens is that the IRS is going to be looking at these within their systems, and they’re just automatically going to send these refunds out. So there’s nothing a taxpayer needs to do in order to get those refunds; they’ll just come in the mail along with a letter. And so, you know, some people are going to get late Christmas gifts this year, I think.

Host: Yeah. Hey, that’s okay. A lot of great information each and every week here in tax insights. I know that we’re starting to get into your busy season, but we do want to invite listeners if they need to connect with you and the team over at Hawkins Ash. How do they do that?

Jeff: I would go right to our website, which is HawkinsAsh.CPA, or just listen to us on any of our social media.

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Jeff Dvorachek
As a partner, I have thorough experience providing tax services to individuals, privately held businesses, nonprofit entities and estates and trusts. I also provide compilation and review services.

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