The Internal Revenue Service has announced that it will waive the late-payment penalty of half-a-percent per month for taxpayers whose tax returns included any of the 31 forms that weren't released by the agency until February or March. Such forms include Form 8863, relating to education tax credits, Form 5695, relating to the residential energy credit, and Form 4562, relating to depreciation.
To be eligible for the penalty relief, taxpayers would need to have a tax return that contains any of the 31 forms that were finalized in February or March, filed an extension, filed their return by the extended due date, and paid any remaining tax by the extended due date. Normally, the IRS assesses a late payment penalty of 0.5% per month of the balance due plus interest, currently at 3% annually, on any tax paid after the original deadline. Under this penalty relief, the IRS will waive the late payment penalty. Interest will not be waived.
Taxpayers will receive a notice from the IRS calculating the penalty and interest on any payment received after the original deadline. Taxpayers will then need to respond by writing back to the IRS to request the penalty waiver.
Notice 2013-24 contains instructions on how to respond to the IRS to request a waiver of the late payment penalty and includes a list of the forms for which the IRS is providing penalty relief.
The IRS cautions that taxpayers should still properly estimate their tax liability and remit the tax by the original deadline.
This penalty relief provides an opportunity for taxpayers, notes Joe Kristan, CPA:
"By issuing this notice early, the IRS has also given taxpayers a planning opportunity. If you have a big balance due on April 15, and you have one of the qualifying forms, you now are eligible for what amounts to a low-interest loan for up to six months, until the October 15 extension deadline. Many taxpayers accelerated income into 2012 to beat the 2013 tax hikes, and [the] loan might come in handy."
For more details see:
- Relief Available To Many Extension Requesters Claiming Tax Benefits (IR-2013-31)
- Notice 2013-24 (pdf)
Elsewhere on the Web:
- Tax penalty relief for some who file for an extension (Don't Mess With Taxes)
- Relief Available To Many Extension Requesters Claiming Tax Benefits (Accounting Web)