The IRS Is Waiving $1 Billion in Penalties for Some Who Owe in Back Taxes

The Internal Revenue Service (IRS) is putting a very special present under the tree this year. The organization is waving $1 billion in penalty fees for 4.7 million individuals, businesses, and organizations who owe back taxes, via Axios. The IRS announced the remarkably rare bout of relief on Tuesday, confirming that roughly 70 percent of the people affected make less than $100,000 each year. It will save all affected taxpayers around $200 each.

The IRS is waiving the penalty fees for those who owe back taxes from 2020 and 2021 because it ceased sending payment reminders in February of 2022, due to pandemic-related complications. However, failure-to-pay penalties continued to mount during this time for those who didn’t pay their bills following the first balance-due notice.

"As the IRS has been preparing to return to normal collection mailings, we have been concerned about taxpayers who haven't heard from us in a while suddenly getting a larger tax bill," IRS Commissioner Danny Werfel explained in a statement.

The penalty relief will be applied automatically, the IRS said. Taxpayers are not required to take any independent action.

Those who owe for 2020 and 2021 are still required to pay taxes from those years, but their penalty fees have been dismissed. The IRS reported they plan to resume sending normal tax collection notices for ‘20 and ‘21 to those affected.

"The IRS should be looking out for taxpayers, and this penalty relief is a common-sense approach to help people in this situation," Werfel concluded the statement.