IRS Tax Amnesty Programs for 2024

In 2024, the IRS resumed many of the collection activities that were paused during the COVID pandemic, but the agency also offered amnesty on about $1 billion in penalties for approximately 4.7 million individuals and businesses. The 2024 penalty forgiveness applies to taxpayers who incurred failure-to-pay penalties on 2020 and 2021 tax returns. 

The IRS applied the relief automatically to qualifying individual and business taxpayers by reducing their tax bills or providing refunds as applicable. 

IRS amnesty programs are not new—the agency regularly offers different types of penalty relief, tax forgiveness programs, and amnesty options for taxpayers. Some programs are only available for a limited time, while others are permanent. Read on to learn more about current IRS amnesty programs. 

What Is IRS Tax Amnesty?

Amnesty means forgiveness for past offenses. IRS amnesty is when the IRS forgives taxes or waives penalties to help taxpayers. Sometimes, the IRS offers one-time amnesty programs that automatically cover a whole group of taxpayers, such as the 2024 penalty amnesty. The agency also has long-term amnesty programs such as first-time penalty abatement or voluntary disclosure programs that provide amnesty to qualifying applicants.

Confusion with Tax Amnesty

Many people confuse IRS amnesty with other programs that are offered that may allow taxpayers to resolve taxes that are owed for less, but they are considered amnesty programs. Below are those common programs.

• Offer in compromise: This program is not considered amnesty; however, taxpayers can pay less than they owe if they meet specific criteria based on their financial and tax situation.
• Currently not collectible: This program puts a hold on collections based on the taxpayer's financial situation. At times, the statute of limitations can expire, and then the taxes are no longer owed.
• Partial payment installment agreement: This allows the taxpayer to pay low monthly payments towards the tax amount owed. Many times, the statute of limitations expires before it is paid in full and the remaining balance falls off and no longer needs to be paid.

IRS Tax Amnesty Programs Available in 2024

If you're struggling with unaffordable tax debt or penalties, you may want to look into the agency's amnesty programs and see if you qualify to apply. As of 2024, the IRS currently offers the following programs. 

Voluntary Disclosure Program

Handled by IRS Criminal Investigation, the Voluntary Disclosure program allows people who have willfully failed to follow tax laws to reduce their risk of criminal prosecution by coming forward voluntarily. 

Who can apply? 

Taxpayers who have willfully not reported income or failed to comply with other tax laws. This program is not for people who made a mistake on their returns. You also cannot use this program to report illegal source income, including income earned with activities that are legal on the state level but illegal on the federal level (for example, income earned by selling cannabis). 

To qualify, you must apply before the IRS starts a civil examination or criminal investigation and/or before a third party contacts the IRS about your non-compliance. 

How to apply? 

Request pre-clearance by filing Part I of Form 14457. Once you receive a preclearance letter, file Part II of this form within 45 days. If Criminal Investigation accepts your request to participate in this program, a civil examiner will contact you. Work with them to complete the process by submitting additional documents as requested.

Benefits? 

By getting into compliance voluntarily, you may be able to avoid criminal prosecution. The Criminal Investigation unit reviews your application and determines whether or not to recommend criminal prosecution.

Risks and considerations?

The Voluntary Disclosure practice doesn't guarantee that you won't face criminal prosecution, but it can help to minimize the risk. To be on the safe side, always consult with a tax attorney before applying.

Alternatives? 

Again, this program is for people for willfully didn't follow the tax laws. If you were not willful, you may be able to deal with unreported income by filing delinquent returns or amending your returns. If you haven't reported foreign bank accounts or other foreign assets, you may be able to get into compliance through the Streamlined Filing Compliance Procedures or the Delinquent FBAR submission procedures which are discussed below.

Deadline: This program has open applications.

Streamlined Filing Compliance Procedures

This program is designed for people who did not file FBARs and who have unreported income related to the FBAR. 

For instance, imagine you earned interest on a foreign account that was worth over $10,000. You were supposed to report the foreign account on an FBAR and the interest on your income tax return. This program allows you to rectify both of those errors but only if your behavior was non-willful, meaning it was the result of an accident, negligee, or a good-faith misunderstanding of the law.

Who can apply? 

Individual taxpayers and the estates of individuals who non-willfully failed to report foreign accounts and the income derived from them. You cannot use this program if the IRS has already started an audit/civil examination on the years in question.

How to apply? 

To take advantage of this program, you must sign a form certifying that you acted non-willfully. Then, you must file the last six years of FBARs and you should amend or file the last three years of income tax returns.

Benefits? 

If you live in another country, the IRS will waive all penalties including failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties. If you are a U.S. resident, the IRS will waive the accuracy-related penalties, information return penalties, and/or FBAR penalties.

Risks and considerations? 

If you're based in the United States, you will be subject to the Title 26 miscellaneous offshore penalty which is 5% of the highest aggregate value of your unreported foreign accounts/assets during the years related to the disclosure. To learn about other considerations in your specific situation, consult with a tax attorney.

Alternatives? 

If your behavior was willful, you generally need to use the Voluntary Disclosure Program rather than this option. If you don't have unreported income due to your foreign bank accounts, you don't need to use this program. Instead, you can just file your delinquent FBARs using the delinquent FBAR submission procedures. 

Simply file the returns late online, but be prepared to note that you forgot to file on time or weren't aware of the rules.

Deadline: This program is open to applications.

First-Time Penalty Abatement

Taxpayers with a history of compliance can generally get penalties waived from the IRS. The IRS offers first-time penalty abatement for failure-to-file penalties on individual, partnership, S-corp, and some excise returns. The agency will also forgive failure-to-pay penalties and failure-to-deposit penalties.

Who can apply?

Individuals and businesses can apply for first-time penalty abatement in 2024. To qualify, you must have filed the same return (if required) for the last three years without incurring penalties, and if you had penalties removed during that time, it can't be due to first-time abatement.

How to apply? 

You can apply by calling the IRS or by filing Form 843 (Request for Penalty Abatement). 

Benefits? 

First-time penalty abatement is relatively easy to get if you qualify, and it can save you a significant amount of money. Late payment and filing penalties together can get up to 50% of the balance. Additionally, when the IRS removes penalties, it also removes the interest that accrued on the penalties.

Risks and considerations? 

There aren't really risks to this program, except that you can only use it every four years or so. Note that as of 2024, if you apply for penalty abatement due to reasonable cause but you qualify for first-time abatement, the IRS will classify the penalty waiver as first-time abatement. That can prevent you from getting this type of abatement again in the next few years.

Also, you may want to wait to apply until you've made arrangements to pay with the IRS. Otherwise, if you apply for abatement while the IRS is still adding penalties to your account, you will only get a waiver on the existing penalties. In contrast, if you wait until all of the penalties have been applied, you will be able to get more relief.

Alternatives? 

The IRS also offers penalty relief for reasonable cause. This applies if you file or pay late due to a death, serious illness, fire, natural disaster, or other very serious reason. Depending on the specifics of your situation, you may also be able to get your tax debt reduced through an offer in compromise, innocent spouse relief, or appeals.

Deadline: The IRS always accepts requests for penalty abatement, but you only have three years to request a refund in most cases.

2024 ERC Amnesty

In December 2023, the IRS announced an amnesty program for employers who incorrectly claimed the Employee Retention Credit (ERC) during COVID-19. Due to the ERC mills which aggressively promoted this credit, many companies claimed it incorrectly, but if they participate in this program, they can get amnesty on penalties, criminal exposure, and even some of the tax.

Who can apply?

Taxpayers who claimed the ERC incorrectly can request amnesty if they meet the following criteria: 1) not under criminal investigation by the IRS, 2) not having their employment tax returns audited by the IRS, and 3) have not received a demand from the IRS to repay the ERC. Additionally, you cannot participate if the IRS has received a notification about your noncompliance from a third party.

How to apply?

To apply, file Form 15434 Application for Employee Retention Credit Voluntary Disclosure Program. Note the credits claimed and the tax periods. Then, use the form to calculate the amount of your repayment and note how you plan to pay. You may be able to set up a payment plan.

Benefits? 

If you qualify for ERC Amnesty, you only have to repay 80% of the credit, and the IRS will generally allow you to set up a payment plan. You also don't have to worry about any criminal charges or additional penalties. 

Risks and considerations?

If you claimed the ERC in 2020, you will need to sign a document allowing the IRS to extend the audit period for your payroll returns from that year. 

Alternatives?

This 2024 program is the only way to get amnesty on ERC credits, but if your application is still pending, you can request to have it withdrawn. The IRS is auditing ERC returns at high rates to find employers who claimed the credit incorrectly, and failing the audit can lead to significant penalties. The agency is also trying to collect info on ERC mills that encouraged people to claim the credit fraudulently. 

Deadline: Ended March 22, 2024

Penalty Relief for 2020 and 2021 Tax Returns

In 2024, the IRS announced an automatic amnesty on failure-to-pay penalties on 2021 and 2022 returns. The amnesty applies to approximately $1 billion in penalties incurred by 4.7 million taxpayers and organizations. You don't have to apply. 

If you qualified, the IRS sent you a letter. If you have penalties that don't qualify for this automatic amnesty, consider looking into first-time penalty abatement or abatement for reasonable cause.

History and Evolution of Amnesty Programs

The IRS has a long history of providing various types of amnesty to taxpayers. After WWII, the agency began allowing people who had unreported income to come forward in exchange for avoiding persecution. The IRS has also had several different amnesty programs over the years. 

The agency offers amnesty to help taxpayers, to encourage compliance, and to protect its reputation among taxpayers. The following programs were all designed to allow taxpayers with undisclosed foreign income or assets to come forward with limited criminal risk and reduced penalties. Each iteration of the program offered slightly different terms and amnesty options.

• 2009 Offshore Voluntary Disclosure Program (OVDP)
• 2011 Offshore Voluntary Disclosure Initiative (OVDI)
• 2012 Offshore Voluntary Disclosure Program (OVDP)
• 2014 Offshore Voluntary Disclosure Program (OVDP) 

The last program terminated on September 28, 2018, and it was replaced by the Criminal Investigation Voluntary Disclosure Program outlined above. The IRS started the streamlined procedures in 2012 for people who didn't act willfully (for instance, people who made mistakes or didn't know about the requirements), made significant updates in 2014, and continues the program through the present day.

How can I settle my tax debt if I don't qualify for amnesty?

If you don't qualify for amnesty, you may still be able to settle your tax debt. Offer in compromise doubt as to collectibility is for people who can't afford to pay the tax debt. OIC doubt as to liability is for situations where there is a real doubt that you owe the tax. OIC effective tax administration can help you get a lower settlement in cases where it would be unfair/inequitable to make you pay the full bill.

Future Outlook and Legislative Changes

As of 2024, the IRS has not announced any new amnesty programs other than the ones listed in this post. The agency's 12 to 18-month strategic operating plan states that the agency plans to focus more on taxpayer fairness, FBAR compliance, and auditing high-income earners and complex partnerships. 

State Tax Amnesty

States may also offer amnesty programs to taxpayers. Many states have offer-in-compromise programs that allow qualifying taxpayers who cannot afford to pay their taxes to settle for less than they owe, but some states don't have this option. Additionally, many states offer amnesty programs on a limited-time basis to qualifying taxpayers. 

Finally, many states that updated their nexus laws in the wake of South Dakota vs. Wayfair, Inc. have voluntary disclosure programs that allow out-of-state businesses that haven't been collecting sales tax to avoid penalties if they come forward voluntarily before the state contacts them. 

Get Help With IRS Tax Amnesty

Use TaxCure to find a qualified tax professional who can help you apply for tax amnesty. You can apply for some of these programs on your own, but for best results, you may want to work with a professional, especially with the Voluntary Disclosure Program and Streamlined Compliance Procedures.