The IRS announces a true holiday miracle for tired taxpayers

When most of us think of the Internal Revenue Service, it's with a scowl on our faces, thinking about paying our yearly taxes or — heaven forbid — trying to get in touch with it via phone.

But even a foreboding government organization is capable of holiday cheer, as the IRS proved on Dec. 19 by announcing that it would provide roughly $1 billion in penalty relief for 4.7 million people, most of whom make less than $400,000 per year.

Related: IRS announces 2024 tax brackets: What you need to know

While thinking about the IRS getting into the Christmas spirit is uncharacteristically heartwarming, it has a good reason for making the move. 

"Due to the unprecedented effects of the COVID-19 pandemic, the IRS temporarily suspended the mailing of automated reminders to pay overdue tax bills starting in February 2022. These reminders would have normally been issued as a follow up after the initial notice. Although these reminder notices were suspended, the failure-to-pay penalty continues to accrue for taxpayers who did not fully pay their bills in response to the initial balance due notice," a press release stated.

Because of what it calls an "unusual situation," the IRS will also waive failure-to-pay penalties for tax years 2020 and 2021. Based on its calculations, taxpayers should save about $206 per return.

The IRS has already adjusted eligible individual accounts, and business accounts should see adjustments between late December and early January. Trusts, estates, and tax-exempt organizations will follow in late February to early March 2024.

"As the IRS has been preparing to return to normal collection mailings, we have been concerned about taxpayers who haven't heard from us in a while suddenly getting a larger tax bill. The IRS should be looking out for taxpayers, and this penalty relief is a common-sense approach to help people in this situation," said IRS Commissioner Danny Werfel. "We are taking other steps to help taxpayers with past-due bills, and we have options to help people struggling to pay."

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