The American Institute of Certified Public Accountants (AICPA)[1] and the National Association of Enrolled Agents (NAEA)[2] have both written the IRS asking for the September 30 filing deadline to obtain penalty relief under Notice 2022-36 be pushed back.

The Notice, issued by the IRS on August 24, 2022, provides for automatic relief from failure to file penalties for certain 2019 and 2020 tax year returns filed on or before September 30, 2022.[3]

AICPA Letter

The first letter was sent by the AICPA Tax Executive Committee on August 30, 2022, addressed to Lily Batchelder (Assistant Secretary for Tax Policy, Department of the Treasury), Charles P. Rettig (Commissioner of the Internal Revenue Service) and William M. Paul (Principal Deputy Chief Counsel, Internal Revenue Service). The Tax Executive Committee is the senior AICPA committee dealing with tax matters and generally has the authority to speak on behalf of the Institute when sending comments such as this letter to the IRS.

The AICPA letter, while thanking the IRS for providing the relief, notes that the AICPA has been asking for such relief since early in the pandemic:

We are pleased that IRS has provided some measure of COVID-19 related penalty relief for taxpayers. We applaud the unprecedented waiver of the failure to file penalty under section 6651(a)(1). And we praise the IRS for waiving the various international information reporting penalties under sections 6038, 6038A, 6038C, 6039F and 6677 in certain cases. Under the Notice, these penalties will be waived if the returns are filed on or before September 30, 2022. As the AICPA has requested and pointed out in various letters to IRS and Congress and through our multi-year dialogue with IRS on Form 3520 penalties, the penalty relief provided will save the Treasury and the IRS resources by prompting voluntary compliance. Additionally, significant taxpayer burden will be reduced by automatically waiving the penalties covered by Notice 2022-36 and automatically providing refunds where penalties have already been paid.[4]

In a footnote, the document lists all the letters and other documents the AICPA sent to the IRS and Congress requesting relief of this sort and the dates when they were sent:

See AICPA letters, “Additional Measures to Address Backlog,” July 11, 2022, “Written Statement for Hearing before U.S. Senate Committee on Finance on Spotlighting IRS Customer Service Challenges,” February 17, 2022, “AICPA Statement on Recent IRS Announcement,” January 27, 2022, “AICPA Statement on AICPA Calls on IRS to Do More,” January 10, 2022, “H.R. 5155, Taxpayer Penalty Protection Act of 2021,” September 3, 2021, “Additional Penalty Relief Measures,” May 17, 2021, “Certainty and Relief Needed for the 2020 Tax Year,” February 23, 2021, “Underpayment and Late Payment Penalty Relief for 2020 Tax Year,” February 16, 2021, “Relief from Coronavirus Related Penalties,” December 7, 2020, “Written Statement for November 20, 2020 Hearing of U.S. House Ways and Means Committee Oversight Subcommittee with the Commissioner of the Internal Revenue Service,” December 2, 2020, “Penalty Relief for 2019 Tax Year Filing Season,” November 5, 2020, and “Recommendations for Phase Four Federal Legislation Addressing COVID-19 (Coronavirus) Pandemic,” July 20, 2020.[5]

The AICPA Tax Executive Committee letter provides a number of reasons for their request for the deadline to be pushed back to December 31, 2022.[6] First, the letter notes the upcoming extended due dates for filing 2021 returns that will make it difficult for taxpayers to obtain sufficient assistance from tax professionals before that deadline passes:

The business cycle of the tax profession is filled with upcoming deadlines (September 15 deadline for pass-throughs, September 30 for trusts, and October 15 for individuals and corporations), and inserting a September 30 deadline into this mix creates an insurmountable burden for most practitioners and taxpayers.[7]

The letter also points out complexities inherent in international information reporting that argue for a deadline beyond the September 30 date:

Additionally, given the complex facts often associated with international information reporting and that many affected taxpayers live abroad, the September 30 deadline is unrealistic and will fail to prompt a critical mass of impacted taxpayers to avail themselves of the benefits of the Notice.[8]

The letter argues that giving the additional relief will reduce the burden on both the IRS and taxpayers in this area:

Extending the deadline will assist the practitioner community in maximizing the relief provided and will bring more taxpayers into voluntary compliance. In turn, such voluntary compliance will save the IRS resources.[9]

As well, the Committee asks for clarification regarding the application of the timely mailing treated as timely filing provisions of IRC §7502. That is, will returns be deemed filed by the September 30 deadline (or any later deadline the IRS might grant after considering the AICPA request) if they are postmarked by September 30 and proof is offered in accordance with the regulations under §7502:

We also note that the Notice provides relief for “specified tax returns for taxable years 2019 and 2020 that are filed on or before September 30, 2022.” We urge clarification to make explicit that the rules under section 7502 apply to determine whether returns are filed timely under this Notice.[10]

The AICPA concludes by noting that the Institute plans to submit additional comments on issues related to Notice 2022-36:

We plan to submit soon another letter on additional issues related to Notice 2022-36 for IRS consideration and clarification.[11]

NAEA Letter

Three days after the AICPA sent its letter to Treasury, Kathy Brown, EA, President of the National Association of Enrolled Agents wrote a letter similarly asking for a delay in the September 30, 2022 deadline for Notice 2022-36 relief. The NAEA letter was addressed to Commissioner Rettig, with copies sent to National Taxpayer Advocate Erin Collins and Lily Batchelder, Assistant Secretary for Tax Policy, Department of Treasury.

The NAEA letter begins by pointing out the Notice does offer an opportunity to those who have not yet filed their 2019 and 2020 returns to participate in this relief:

While the Notice extends failure to file (FTF) penalty relief applies automatically to those taxpayers who have already filed, it also opens a window prospectively to those who owe IRS a wide range of TY19 and TY20 returns. Those taxpayers must file returns by September 30, 2022, or approximately five weeks from the date the Service announced the relief.[12]

The letter argues that this time frame is simply too short to realistically allow those who have not yet filed their 2019 or 2020 returns to complete the process due to several reasons:

In our opinion, five weeks is simply not enough time for those non-filers who would be motivated by the penalty relief to file their returns. We see three distinct steps required to file the returns: 1) learn that IRS has provided a significant discount to what most assume will be both a painful and expensive process; 2) gather information return and other supporting documents; and 3) complete and file the return.

Each of these three steps is challenging. Many taxpayers will simply not be aware of the relief in time to take advantage of it. Once aware, pulling together the necessary records will take time and a Form 8821 will need to be filed if a tax professional is involved.[13]

Like the AICPA letter, this letter points out the impact of the extended due date deadlines for 2021 returns on the ability of tax professionals to assist such taxpayers:

Further, the return preparation itself will be a challenge for self-preparers as well as for tax professionals. EAs are already dealing with a busy September calendar with a partnership/S Corp deadline on September 15th and an October 15th TY22 Form 1040 deadline. Many taxpayers will be looking for assistance from tax professionals that might not be realistic given the short deadline.[14]

The NAEA letter also argues that allowing more taxpayers to obtain this relief will benefit the IRS:

The relief the IRS has offered is significant and should prompt untold numbers of non-filers to come into the fold. Some of these taxpayers will of necessity file more than just two years of returns. Once the returns are filed, their balances due (if any) are known and knowable and IRS will be much better positioned to work with taxpayers and/or their representatives on payment alternatives.[15]

The NAEA asks for an extension of time to November 30 for taxpayers to file and be eligible for Notice 2022-36 relief:

While we all believe that the best time to file a return is before its deadline, the second best time to file a return is now. Obviously, these taxpayers can no longer file timely. But with the right incentives that address the particular challenges of the pandemic, they can file soon. We see this penalty relief as a wonderful opportunity for a win/win for taxpayers and the Service and ask you to consider pushing the filing deadline to later in 2022. We recommend November 30, which would provide a roughly 90-day window, though would certainly be flexible.[16]

Will the IRS Grant Such Relief?

The real question that will need to be answered is if the IRS will grant such relief. As the AICPA letter’s long list of prior requests in the area makes clear, the IRS has not been keen on granting such relief and it’s very possible the agency will not have much sympathy for those who were not already in the process of attempting to get their returns filed. The agency may take the position that five weeks will cover those who were moving to take care of the situation when the Notice was issued. The IRS might feel providing for an extended deadline is giving a “get out of jail free” card to taxpayers whose failures to meet their filing obligations had little or nothing to do with the COVID-19 pandemic and issues created by that.

But certainly, it can’t hurt to ask the IRS to provide a somewhat longer period to qualify for this relief. Certainly, it would have been reasonable for a tax professional who was approached by someone to handle filings for 2019 and 2020 recently, when getting out of the penalties would have required a showing of reasonable cause that would have needed to be developed and submitted with the returns to have planned to delay dealing with those returns until 2021 deadline returns were dealt with. For those professionals, the September 30 deadline may create a real problem trying to find time to get such returns filed before the deadline and still get 2021 returns prepared to be timely filed.

[1] AICPA Tax Executive Committee Letter, “Notice 2022-36 Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020 and Request for Extended Deadline,” August 30, 2022, https://www.taxnotes.com/tax-notes-today-federal/penalties/aicpa-seeks-later-deadline-returns-subject-penalty-relief/2022/09/02/7f1pb (subscription required, retrieved September 3, 2022)

[2] Kathy Brown, EA, President, National Association of Enrolled Agents, Letter, “Pandemic-Related Failure to File Penalty Relief,” September 2, 2022, https://www.taxnotes.com/tax-notes-today-federal/penalties/enrolled-agents-say-more-time-needed-penalty-relief/2022/09/06/7f1tg (subscription required, retrieved September 3, 2022)

[3] See our article online about this relief: Ed Zollars, CPA, “IRS Announces Broad Penalty Relief for Specified 2019 and 2020 Tax and Information Returns,” Current Federal Tax Developments website, August 24, 2022, https://www.currentfederaltaxdevelopments.com/blog/2022/8/24/irs-announces-broad-penalty-relief-for-specified-2019-and-2020-tax-and-information-returns (retrieved September 3, 2022)

[4] AICPA Tax Executive Committee Letter, “Notice 2022-36 Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020 and Request for Extended Deadline,” August 30, 2022

[5] AICPA Tax Executive Committee Letter, “Notice 2022-36 Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020 and Request for Extended Deadline,” August 30, 2022

[6] AICPA Tax Executive Committee Letter, “Notice 2022-36 Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020 and Request for Extended Deadline,” August 30, 2022

[7] AICPA Tax Executive Committee Letter, “Notice 2022-36 Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020 and Request for Extended Deadline,” August 30, 2022

[8] AICPA Tax Executive Committee Letter, “Notice 2022-36 Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020 and Request for Extended Deadline,” August 30, 2022

[9] AICPA Tax Executive Committee Letter, “Notice 2022-36 Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020 and Request for Extended Deadline,” August 30, 2022

[10] AICPA Tax Executive Committee Letter, “Notice 2022-36 Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020 and Request for Extended Deadline,” August 30, 2022

[11] AICPA Tax Executive Committee Letter, “Notice 2022-36 Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020 and Request for Extended Deadline,” August 30, 2022

[12] Kathy Brown, EA, President, National Association of Enrolled Agents, Letter, “Pandemic-Related Failure to File Penalty Relief,” September 2, 2022

[13] Kathy Brown, EA, President, National Association of Enrolled Agents, Letter, “Pandemic-Related Failure to File Penalty Relief,” September 2, 2022

[14] Kathy Brown, EA, President, National Association of Enrolled Agents, Letter, “Pandemic-Related Failure to File Penalty Relief,” September 2, 2022

[15] Kathy Brown, EA, President, National Association of Enrolled Agents, Letter, “Pandemic-Related Failure to File Penalty Relief,” September 2, 2022

[16] Kathy Brown, EA, President, National Association of Enrolled Agents, Letter, “Pandemic-Related Failure to File Penalty Relief,” September 2, 2022