The Commissioner of the IRS, Charles Rettig, recently told an American Institute of CPAs (AICPA) on-line conference that blanket penalty relief for late-filing and payment penalties related to COVID-19 challenges, “is not going to happen.”
IRS Notice 2020-23, postponed the filing and paying deadline for tax year 2019 from April 15, 2020 to July 15, 2020. On July 2, 2020, the AICPA wrote a letter to the IRS noting the continued struggle taxpayers and tax preparers faced to meet the July 15, 2020 deadline. The letter urged the IRS to automatically waive failure to file and failure to pay penalties for the millions of taxpayers affected by the Coronavirus pandemic. On Nov. 5, 2020, the AICPA wrote another letter to the IRS again calling for a specific Coronavirus-related penalty abatement process. The AICPA noted that the IRS has already provided much relief through IR-2020-248, but reiterated its call for broader failure to file and failure to pay penalty relief based upon insurmountable challenges faced by taxpayers who tried in good faith to comply with the July 15 deadline, but were unable to do so.
The Commissioner expressed concerns over blanket relief because it could unjustly afford relief to those taxpayers who did no attempt to file and pay in good faith. The Commissioner also noted that the IRS suspended balance due notices and bad check penalties associated with mail delays. He further said that the IRS announced it would be internally correcting matching errors that caused penalty notices to employers entitled to failure to deposit relief in Notice 2020-22. Finally, the Commissioner reminded everyone that the IRS will consider penalty abatement on a case by case basis under the existing first time abatement procedures or reasonable cause standard.
Tax professional organizations, tax practitioners and taxpayers feel strongly about potentially needing to use first time abatement to abate the penalty assessed due to impacts of Coronavirus pandemic. For this reason, tax professionals maybe seeking reconsideration of the Commissioner’s position due to the extraordinary nature of 2020.