IRS to refund 1.6 million people who missed tax filing deadlines during the pandemic

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The Internal Revenue Service is sending refunds to more than a million Americans who filed their taxes late in the early days of the COVID-19 pandemic. Taxpayers have until September 30 to take advantage of this reprieve, the agency said on Monday.

Typically, people who file their tax returns late without requesting an extension can expect to pay penalties of up to 25% of the amount of taxes they owe. For 2019 and 2020, however, the agency is suspending penalties for late filers. Taxpayers who've already paid a fine will automatically be given refunds, the IRS said.

More than 1.6 million taxpayers are set to receive refunds or credits totaling $1.2 billion — an average of $750 per person, although some may get more and some less.

Taxpayers who have already filed their returns don't need to do anything, the IRS said. If you've been notified of a fine but have not yet paid it, the penalty will be erased, while those who've already paid a penalty will receive a refund or  credit. Most of the refunds will be delivered by the end of September, according to the agency.

Taxpayers who have yet to file returns for 2019 and 2020 can still have penalties forgiven — as long as their returns are filed by September 30, 2022. That gives late filers just over two weeks to wrap up outstanding returns.

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The effort is a move to "help struggling taxpayers affected by the COVID-19 pandemic," according to the IRS. The plan could also help the agency, which is struggling to dig itself out of a massive backlog of unprocessed tax returns.

The pandemic has had an "unprecedented" effect on the tax agency, the IRS said in a notice, highlighting the agency's role in distributing federal stimulus payments and taking other steps to help taxpayers weather the pandemic. 

Dropping late-filing penalties could also benefit the IRS by helping the agency focus on whittling down its backlog of tax paperwork and returning to normal for the 2023 tax season. 

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