Coronavirus has caused delays to tax return processing as well as payment processing
The Internal Revenue Service has delayed processing payments and paper returns due to the COVID-19 lockdown that shuttered America. People who sent tax payments to the IRS using paper checks are most affected and it will take some time for the IRS to catch up.
Do not send another paper check if your original paper check still hasn’t cleared the IRS account. It is part of the backlog of tax returns and other unsorted, unopened IRS business mail.
The IRS should not penalize a taxpayer if the IRS, itself, is late opening the mail. If a tax return or check is postmarked by the due date, they will consider it an on-time payment and there will be no fines or fees.
IRS flexibility during the pandemic
Normally the IRS charges a $25 NSF penalty for bounced checks under $1,250. This year, in response to overwhelming financial hardship and delays at the IRS, it is waiving fees for dishonored checks received between March 1 and July 15.
If a taxpayer missed a filing deadline despite their best efforts, the IRS promises to be flexible and may even offer penalty relief. It has been suggested to write “COVID-19” on the return with a note describing why the payment is late.
The IRS extended the filing deadline to July 15 and allowed an extension to October 15. The IRS also extended the contribution date to an individual retirement account (IRA), health savings account (HSA), Archer medical savings account (Archer MSA), and Coverdell education savings account (Coverdell ESA) to July 15. This gives greater flexibility for taxpayers to claim prior-year contributions, depending on their individual situations.
2020 has been an unusual tax year resulting in unusual delays, but also unusual penalty forgiveness. To avoid unnecessary penalties, document your mailing dates and detail your circumstances on your returns and correspondence–especially if it’s a few days behind.