AICPA Asks IRS for Penalty Relief for 2019 Tax Year Filing Season

For many Americans, the global COVID-19 pandemic has created obstacles preventing many taxpayers and practitioners from filing returns. The American Institute of CPAs (AICPA) submitted a letter to the Department of the Treasury and the Internal Revenue Service (IRS) requesting penalty relief for the 2019 tax year filing season.

The IRS recently released guidance offering relief to taxpayers that were unable to pay their tax obligations by making it easier to set up payment agreements. However, the AICPA maintains that further penalty relief is needed.

Taxpayers are required to file their federal income taxes by the established due date. In order to avoid failure-to-file penalties, the taxpayer must show such failure to file was due to reasonable cause and not willful neglect. If the taxpayer can show reasonable cause for not filing on time, the taxpayer may be able to waive the penalties. However, this penalty abatement process is burdensome for the taxpayer, the practitioner and the IRS.

In the letter, the AICPA states, “…many taxpayers and tax preparers faced insurmountable challenges as a result of the [COVID-19 pandemic] and were unable to pay taxes or timely file tax returns by the extended due date, despite making good faith efforts to do so. Penalty relief should be a priority as part of the IRS’s efforts to mitigate the negative impact of the coronavirus.”

The AICPA is urging the IRS implement the following:

Provide a penalty waiver and create an expedited and streamlined reasonable cause penalty abatement process to taxpayers affected by the COVID-19 pandemic that eliminates the need for written requests;
Develop specific coronavirus examples that qualify for reasonable cause abatement and share these examples with all telephone assistors through an interim guidance; and
Develop a dedicated telephone number, or dedicated prompt, for taxpayers or their advisors to call to request coronavirus-related penalty relief.

“2020 has been a challenging tax year for taxpayers, tax practitioners and for the government. This year, of all years, the IRS should provide relief for uncontrollable COVID-19 impacts. Though we have had conversations with the IRS, we are greatly disappointed that the IRS has yet to step in to provide the additional help to taxpayers and their advisors that could make a tremendous difference.” said AICPA Vice President of Taxation, Edward Karl, CPA, CGMA. “We believe the IRS understands the unprecedented nature of this tax filing season and are hopeful that they will issue guidance granting broader penalty relief to taxpayers during this time.”