In an almost unprecedented step, the Internal Revenue Service is forgiving nearly $1B in penalties to the 4.7M individuals, businesses, and charitable organizations who were not sent automated collection reminders during the pandemic. The Service is doing this hoping that it will reduce their current backlog.
The long absence of these computer generated letters had major consequences for taxpayers who may have assumed that they no longer owed a tax debt. In reality, the interest and penalties continued to accrue even though the notices stopped being generated.
This penalty relief applies only to taxpayers who…
1 – Owed less than $100,000 in taxes from 2020 and 2021, and who
2 – Received an initial balance due notice on or prior to December 7, 2023.
Eligible taxpayers will receive an updated notice in early January showing a new balance due including the penalty relief. Interest, which is a separate issue entirely, won’t be forgiven. Those who already paid their taxes who are now eligible for this relief, will get a credit on their IRS Accounts as early as this week.
IRS collection notices for the 2022 tax filing season began appearing in mailboxes last fall. The normal automated IRS Collection System will again begin sending out notices on all tax debts in January.
This special Penalty Relief Program will not go on into perpetuity. It will expire on all qualifying debts that remain unpaid after April 1st of 2024.
So let’s get these issues resolved in the allotted time frame to take advantage of this unprecedented Federal largess.
Let me leave you with this.
During fiscal 2022 which ended last September, our nation had a deficit of $1.7T. This number expressed as a percentage of gross domestic product was 6.7%.
Our deficit historically averaged between 3% to 3.5%. Depending on what numbers you use, it was double the norm.
We aren’t at war, which is when we would normally see this sort of spending. Unemployment is historically low. We face no major threat. Our economy, though weak, isn’t in a recession.
If anything, to lower inflation, less spending would be in order.
Before anyone turns this into a political conversation, this isn’t something where one side of the aisle can blame the other. The 2022 budget was approved in a bi-partisan effort.
The “Build It And They Will Come” attitude of many politicians worked for several decades. They’d take a large swath of farmland, put in everything from electricity to phone service, and auction off the lots. Home builders would build, and instantly the tax base would broaden, allowing the government to cover its newest debts.
The problem is that this concept hasn’t worked for a long time.
As long as population growth was larger than the growth of our debts, the debt service on our deficits could be maintained. But our population growth which peaked with the 1960 census at 18.5% is now down to 7.4% according to the 2020 data.
The older economic concepts of building our tax base are no longer working as they did historically. When you factor in entitlements, which account for over 60% of our national budget, a murky problem comes into specific relief.
If your company ran at a 6.7% loss every year, you’d need to do something about it too. As citizens, we have an obligation to consider this problem.
We’re all going to get through this. Let’s get through it together.
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Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.AccountingSolutionsLtd.com
www.SalarySolutions.net
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