The Internal Revenue Service is providing penalty relief to those who filed their 2019 and 2020 personal and business income tax returns late due to the Covid Pandemic. In addition, they’re providing $1.2B in refunds to the 1.6B taxpayers who’ve already paid these penalties.
Those refunds will be issued without anything else needing to be filed. The payments are expected to be sent beginning in September of this year.
Please understand that the penalty relief is for the Failure to File penalty only. This in no way affects the Service’s collection of the Failure to Pay penalty which will be collected in a normal fashion.
The Failure to File penalty is assessed at 5% per month capping off at a total of 25% on the unpaid liability. In order to qualify for this relief, your returns must be filed by September 30th of 2022.
The Service is also offering penalty relief to businesses required to file various information forms like 1099’s. In order to qualify in 2019, your forms needed to be filed by August 1st or 2020. For 2020, the information forms must have been filed by August 1st of 2021.
Further information can be found at the following web address.
https://www.irs.gov/pub/irs-drop/n-22-36.pdf
Let me leave you with this,
Earlier this week, the new administration announced plans to forgive $10K in student loans to individuals earning less than $125K annually and Married Filing Joint returns below $250K. Further, the administration will forgive up to $20K in education debt if you received a Pell Grant.
The President announced that the pause in student loan payments which has been in effect since March of 2020 will end at the close of this year. There is no time table that was metioned so we don’t know when any of this would actually occur.
Where you sit on this political football is a matter of perspective. If you’re a student overloaded with debt, you probably think this is the best thing since sliced bread.
But the question becomes how much will it actually help you? Most students are carrying well over $100K in debt. Forgiving $10K is a drop in Lake Michigan.
If you’re a parent who scrimped and saved from the year your child was born to pay the exorbitant costs of college, this probably isn’t making you happy. You did the right thing, played the game by the rules, and probably paid taxes on the money you saved, just so you could get this slap in the face.
The timing of this, right before an election where the President’s party is having difficulties, is questionable. What this will do to inflation is yet another issue.
If students aren’t paying their loans, they’ll have additional money to spend on other items, which will further exacerbate the national issue of rising prices. Only time will tell how this plays out in the end. I have a question.
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