As part of its ongoing response to the COVID-19 pandemic, the Internal Revenue Service (IRS) provided penalty relief in Notice 2022-36 for certain tax returns and information returns, such as Forms 1099 and 1042-S, for tax years 2019 and 2020. For additional information about COVID-19 and information reporting requirements and deadlines, please see Tax Alert 2022-1308.

EY Observes: While any penalty relief is welcome, the relief from information return penalties in Notice 2022-36 is limited to narrow circumstances. For example, the relief does not apply to the following:

• Failure to file accurate information returns ($270 per return for 2019 returns, $280 for 2020 returns), including returns with missing or incorrect taxpayer identification numbers for the payees
• Failure to timely file information returns filed after August 1 of the applicable year ($270 per return for 2019, $280 per return for 2020)
• Failure to file as a result of intentional disregard of the filing requirement (typically 10% of the amount required to be reported)
• Penalties related to payee statements (i.e., the copy of the information return required to be provided to the payee)
• Penalties a filer has agreed to pay under an accepted offer in compromise under IRC Section 7122 or a closing agreement under IRC Section 7121
• Penalties finally determined in a judicial proceeding

As the relief in Notice 2022-36 does not extend to these forms, these penalties still apply. Filers may, however, request abatement of penalties for reasonable cause for those penalties not addressed in the notice.

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