Millions of Americans who have yet to pay their taxes for 2020 or 2021 are now set to receive relief from the IRS—and if you’ve failed to report your crypto transactions from those years, you could also stand to benefit.
The IRS has announced that it will waive its standard “failure to pay” penalty for over 4.7 million tax filers who haven’t paid their 2020 or 2021 taxes—a fee equivalent to 0.5% of a filer’s unpaid taxes, charged for every month they fail to pay after a filing deadline. The IRS estimates the program will save taxpayers a collective $1 billion.
That means that many crypto users who have yet to declare their crypto income from 2020 or 2021 are now able to pay taxes on those gains without owing a mountain of late fees.
Who’s eligible for the savings? The IRS says over 4.7 million taxpayers will have their failure to pay penalties waived: mostly, individuals who made under $100,000 in 2020 or 2021, though some with higher incomes will also be included. The penalty relief will only extend, in all cases, to taxpayers with assessed tax under $100,000.
The IRS has dropped the failure to pay penalty for the 2020 and 2021 tax years.
What is the failure to pay penalty, and how does this apply to you? Thread below! 🧵
— Crypto Tax Girl (@CryptoTaxGirl) January 10, 2024
Beginning this month, the IRS will begin sending letters to applicable taxpayers, informing them of their inclusion in the program.
The penalty relief will be automatic. Eligible taxpayers who already paid late penalties for the applicable years will also be refunded the full amount of those charges.
The opportunity won’t last forever, though. The program will only last from now through the end of March; beginning April 1, the IRS’ monthly late fee will return for all taxpayers.
The waiver is not purely out of the goodness of the IRS’ hearts. The federal tax collector says that at the height of the COVID-19 pandemic, it stopped sending out reminders about overdue tax bills, but continued to charge late fees for those bills at the same time. The late fee waiver was designed to remedy the potential unfairness of that situation.
By 2021, over 12% of Americans used or traded cryptocurrency, according to a survey from the Federal Reserve. Of the individuals surveyed, over half made less than $100,000.
Edited by Guillermo Jimenez