Mar 28

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IRS to Waive Late Penalties for Certain Taxpayers

The IRS announced recently (See: IRS Notice 2013-24) that it would waive penalties that would be normally assessed for late payments of taxes, as a result of last minute changes due to law changes in the American Taxpayer Relief Act of 2012.

Generally, individuals, estates and trusts must file their income tax returns and pay all taxes due by April 15.  Corporation, on the other hand, must file and pay all taxes due by March 15.  However, the changes in the American Taxpayer Relief Act of 2012 affected a large number of tax forms.  The revision of these forms caused the IRS to re-program and test the IRS systems, in order to properly release, accept, and process these forms.

The IRS notice stated:

Section 6081 provides that the Secretary may grant a reasonable extension of time for filing any return, but, except in the case of taxpayers who are abroad, no such extension shall be for more than 6 months. To qualify for an extension, taxpayers must properly estimate their tax liability using any available information and report that tax liability on the extension application. An extension of time to file a return, however, does not extend the time to pay the tax and taxpayers generally must pay the tax by the original due date of the return.

Section 6651(a)(2) imposes an addition to tax for payments made after the due date (determined with regard to any extension of time for payment) with respect to tax shown on a return. The section 6651(a)(2) addition to tax will not be imposed if the taxpayer shows that the failure was due to reasonable cause and not willful neglect.

Generally, the IRS automatically assesses the section 6651(a)(2) addition to tax against taxpayers who pay late, and then it sends notice and demand for payment of the addition to tax. For each taxpayer who requests or has requested an extension to file a 2012 income tax return that includes one of the forms listed in Exhibit 1 of this Notice, the IRS will deem the taxpayer to have demonstrated reasonable cause and lack of willful neglect, provided a good faith effort was made to properly estimate the tax liability on the extension application, the estimated amount is paid by the original due date of the return, and any tax owed on the return is fully paid no later than the extended due date of the return. The IRS will abate any section 6651(a)(2) additions to tax assessed with respect to these 2012 income tax returns. When responding to the assessment notice, a taxpayer should submit a letter describing the taxpayer’s eligibility for this relief, identifying which of the form(s) listed in Exhibit 1 of this Notice was included with the taxpayer’s return as filed, and referencing this Notice by number [Notice 2013-24] to the address listed in the assessment notice.”

The following forms (contained in Exhibit 1 of the IRS Notice) are below:

• Form 3800, General Business Credit

• Form 4136, Credit for Federal Tax Paid on Fuels

• Form 4562, Depreciation and Amortization (Including Information on Listed Property)

• Form 5074, Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands

• Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations

• Form 5695, Residential Energy Credits

• Form 5735, American Samoa Economic Development Credit

• Form 5884, Work Opportunity Credit

• Form 6478, Alcohol and Cellulosic Biofuels Credit

• Form 6765, Credit for Increasing Research Activities

• Form 8396, Mortgage Interest Credit

• Form 8582, Passive Activity Loss Limitations

• Form 8820, Orphan Drug Credit

• Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit

• Form 8839, Qualified Adoption Expenses

• Form 8844, Empowerment Zone and Renewal Community Employment Credit

• Form 8845, Indian Employment Credit

• Form 8859, District of Columbia First-Time Homebuyer Credit

• Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)

• Form 8864, Biodiesel and Renewable Diesel Fuels Credit

• Form 8874, New Markets Credits

• Form 8900, Qualified Railroad Track Maintenance Credit

• Form 8903, Domestic Production Activities Deduction

• Form 8908, Energy Efficient Home Credit

• Form 8909, Energy Efficient Appliance Credit

• Form 8910, Alternative Motor Vehicle Credit

• Form 8911, Alternative Fuel Vehicle Refueling Property Credit

• Form 8912, Credit to Holders of Tax Credit Bonds

• Form 8923, Mine Rescue Team Training Credit

• Form 8932, Credit for Employer Differential Wage Payments

• Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit

About the author

Anand Khemlani

I am a founding member of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA), Accredited in Business Valuation (ABV), a Certified Fraud Examiner (CFE) and am a licensed Real Estate Broker. I regularly serve as an expert witness involving results of my forensic accounting assignments and damage analyses. My resume is available on Fulcrum's website

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