Tax Penalty Relief For Late Filing of New IRS Forms

Learn about the special tax relief offered to late filers in 2012 for new IRS forms.

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Tax season got off to a late start this year because due to last minute tax legislation by Congress which required the IRS to make multiple changes to many of its forms and software. (See "When Can You File Your 2012 Tax Return?) Because of this delay, the IRS has decided to give taxpayers who need to file extensions a break.

When you file for an automatic six-month extension to file your tax return, you are required to estimate your taxes due for the year and pay that amount by April 15. You then have until October 15 to file your return. Such estimates can be tricky to make accurately. If, after you complete your actual return for the year, it turns out that your estimate of your taxes due was too low, the IRS normally charges a late-payment penalty of 0.5% per month on all your tax payments made after April 15, up to a maximum of 25% of the unpaid tax, plus interest.

The IRS has decided to waive this penalty for taxpayers who must file one of the tax forms that was delayed because of the last minute changes. This group of people who need to file any of the following forms with their tax returns:

  • Form 4562 (Depreciation and Amortization)
  • Form 8863 Education Credits (American Opportunity and Lifetime Learning Credits)
  • Form 8582 (Passive Activity Loss Limitations)
  • Form 5695 (Residential Energy Credits)
  • Form 3800 (General Business Credit)
  • Form 8908 (Energy Efficient Home Credit)
  • Form 8909 (Energy Efficient Appliance Credit)
  • Form 8396 (Mortgage Interest Credit)

Many small businesses file Form 4562; while many landlords file Forms 4562 and/or Form 8582. Millions of individual taxpayers take the education credit.

The IRS will waive the late filing penalty for these filers provided that:

  • 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.

Eligible taxpayers need not make any special notation on their extension request to obtain this relief. For this reason, the IRS won't know that you're eligible for the relief. Thus, if you filed an extension and underpaid your taxes, the IRS will still send you an assessment notice. To obtain the late penalty relief, you'll have to submit a letter to the IRS describing your eligibility for the relief, identifying which of the forms you've filed that were affected by the tax season delay, and referring to IRS Notice 2013-24. After receipt of this letter, the IRS should cancel the assessment.

However, keep in mind that affected taxpayers will still have to pay interest on their late payments at the rate of 3%.

 April 2013

by: , J.D.

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