2026 Tax Update: Could the IRS Owe You COVID Penalty Relief? What Georgia Taxpayers Should Do Now

New IRS guidance continues to affect COVID-era penalties—and for some Georgia taxpayers, IRS Notice 2024-7 may mean money back (refund) or a credit applied to other tax balances for 2020–2021 failure-to-pay penalties.

If you’re a Georgia individual or small business owner who fell behind during the pandemic (or filed late and got hit with penalties), this is one of those rare moments where the IRS may reduce what you owe without a long appeal—but you still need to verify eligibility and follow the right steps.

This guide breaks down what Notice 2024-7 is, who it can help, and what to do now—especially if you haven’t filed in a few years or you’re dealing with IRS notices.

2026 Update: Could the IRS Owe You COVID Penalty Relief?

Even though this relief was announced in IRS Notice 2024-7, many taxpayers are only discovering it now while:

catching up on unfiled returns,
responding to IRS collection notices, or
reviewing transcripts for 2020–2021.

For eligible taxpayers, the IRS may remove (abate) certain failure-to-pay penalties tied to 2020 and/or 2021 federal income tax, and then issue:

a refund (if you already paid those penalties), or
a credit (applied to another tax year or an existing balance).

Who This Helps (Georgia-Focused)

This is most relevant for:

Individuals and small businesses in Georgia who missed paying federal income taxes during the COVID years (especially tax years 2020 and 2021).
Taxpayers who were assessed failure-to-pay penalties and want to know whether those penalties qualify for automatic abatement under the Notice.
People who need help filing back taxes in Georgia and want to avoid leaving penalty relief unclaimed.

Key Points at a Glance

IRS Notice 2024-7 provides relief for certain 2020–2021 failure-to-pay penalties (not every penalty type).
For many eligible taxpayers, the IRS is supposed to apply this relief automatically, but you should still confirm it happened.
If you already paid the penalty, you may receive a refund or a credit.
If you have unfiled taxes (Georgia or federal), you may need to file returns before relief can fully apply.
Deadlines and statutes of limitation can affect refunds—acting promptly matters.
Georgia state penalties are separate; you must check Georgia Department of Revenue rules for any state relief.

What Is IRS Notice 2024-7 (In Plain English)?

IRS Notice 2024-7 is IRS guidance that provides administrative relief from certain failure-to-pay penalties for tax years 2020 and 2021, based on pandemic-era processing and compliance disruptions.

What it generally does

Depending on your situation, Notice 2024-7 may:

remove qualifying failure-to-pay penalties assessed for 2020 and/or 2021,
reduce your balance due, and/or
trigger a refund or credit of penalties you already paid.

What it generally does not do

Notice 2024-7 is not a blanket waiver of all penalties. In most cases, it does not automatically remove:

failure-to-file penalties,
accuracy-related penalties,
fraud penalties,
penalties for other tax years outside the program parameters,
interest (interest rules can be separate; sometimes interest adjusts when penalties are reduced, but not always).

Bottom line: this is targeted failure-to-pay relief tied to 2020–2021, and eligibility depends on IRS criteria.

Are You Eligible? Who Might Get a Refund or Abatement

Eligibility is fact-specific, but Georgia taxpayers often qualify if they:

had 2020 and/or 2021 federal income tax reported on a return,
were assessed an IRS failure-to-pay penalty for one or both years, and
meet the Notice’s requirements (such as filing status, timing, and account conditions).

Situations where taxpayers often miss out

You may be missing relief (or delaying it) if:

you haven’t filed your 2020 or 2021 return yet,
you filed, but your IRS account has holds, mismatches, or unresolved issues,
you assumed you “don’t qualify” because you’re on a payment plan,
you paid penalties and never checked whether the IRS later issued a credit instead of a refund.

Because the IRS often applies this relief through internal account adjustments, it’s smart to verify via transcripts rather than relying on guesswork.

Step-by-Step: How Georgia Taxpayers Can Claim COVID Penalty Relief

1) Don’t panic — act

If you think you paid 2020–2021 failure-to-pay penalties (or you’re still being billed), start now. The longer you wait, the more you risk running into refund limitation rules or losing track of IRS adjustments.

2) Gather the right documents

Collect:

IRS notices showing penalties (common examples include balance-due notices)
IRS account transcripts for 2020 and 2021
proof of payments (bank records, canceled checks, IRS payment confirmations)
copies of filed returns (or info needed to file missing returns)
any IRS correspondence about penalty abatement

3) Confirm the penalty type: “failure-to-pay”

The Notice is aimed at failure-to-pay penalties. A tax pro can confirm the penalty code on transcripts and whether it matches the relief.

4) Check whether the IRS already adjusted your account

For many eligible taxpayers, the IRS applies relief automatically. Look for signs such as:

the penalty being reversed/removed on the transcript,
a new credit amount,
a refund issued, or
a lower balance due.

If you see a credit but no refund, it may have been applied to another year.

5) If you haven’t filed, file missing returns ASAP

If you have unfiled taxes in Georgia (federal or state), filing is often a prerequisite to unlocking refunds and cleaning up your account.

Individuals: file the missing Form 1040 returns for those years.
Businesses: file the appropriate federal business returns for the entity type.

6) If you believe you qualify but didn’t receive relief, request it

If relief didn’t apply automatically (or applied incorrectly), your next step may include one or more of the following, depending on your facts:

contacting the IRS to request the Notice 2024-7 adjustment, and/or
submitting a formal request such as Form 843 (Claim for Refund and Request for Abatement), and/or
pursuing reasonable cause abatement if Notice 2024-7 relief doesn’t fit your situation.

A professional can help you choose the right route—because using the wrong form or wording can slow things down.

7) Check Georgia state requirements separately

Federal relief does not automatically remove Georgia penalties.

If you owe the Georgia Department of Revenue (or have Georgia late-payment penalties), you’ll generally need to:

file any missing Georgia returns,
follow Georgia DOR procedures for penalty relief or refunds, and
track Georgia’s refund and protest deadlines.

8) Respond quickly to any IRS or Georgia DOR notices

If you receive a notice after filing or after requesting relief, respond by the deadline listed. Keep copies of everything and document phone calls.

Deadlines and Statute of Limitations You Must Know

Timing rules can be the difference between getting money back and getting nothing.

Federal refund time limits (general rule)

For many federal tax refunds, the IRS applies a 3-year rule tied to return due dates and/or payment dates. If you’re trying to turn penalty relief into an actual refund, limitations can apply.

Unfiled returns complicate refund eligibility

If you never filed a return for a year, your ability to obtain a refund can be limited by statute—even if penalties are later reduced. This is why filing late returns promptly is critical.

Program-specific timing can matter

IRS relief programs sometimes include internal cutoffs (for example, the timing of filing and whether your account is in certain statuses). If you think you qualify under Notice 2024-7, it’s worth confirming now rather than assuming it will fix itself.

What to Do If You Owe Back Taxes or Haven’t Filed in Years

If you’re behind on filing, you can still pursue IRS COVID penalty relief 2026 strategies—but start with the basics:

File the missing returns (often the first requirement for meaningful relief)
Pull transcripts to identify exactly what the IRS assessed
Evaluate whether you need an installment agreement, currently-not-collectible status, or another resolution
Then address penalty abatement and any Notice 2024-7 adjustments

This approach helps you avoid wasting time arguing about penalties while the IRS still treats your account as noncompliant.

How Bottom Line Taxes Helps Georgia Residents and Small Businesses

Bottom Line Taxes helps Georgia taxpayers who need:

identification of 2020–2021 failure-to-pay penalties that may qualify under Notice 2024-7
transcript review to confirm whether the IRS already applied a refund or credit
preparation of late-filed or amended returns
assistance with Form 843 and other penalty-abatement requests where appropriate
help responding to IRS and Georgia DOR notices and meeting deadlines

If you’re searching for Bottom Line Taxes Georgia tax help, penalty abatement Georgia, or how to claim IRS penalty refund, this is exactly the kind of issue where professional guidance can prevent delays and missed opportunities.

Frequently Asked Questions (FAQs)

I haven’t filed 2020 and 2021 returns. Can I still get a refund or penalty relief?

Possibly. You often need to file missing returns before the IRS can properly apply adjustments and before you can receive refunds. File as soon as possible and confirm deadlines that may affect refund eligibility.

What forms will I need to claim a refund or abatement?

It depends on what you’re trying to do:

Amending an individual return usually uses Form 1040-X.
Requesting a penalty refund/abatement often involves Form 843 or an IRS-specific process.
Georgia state relief uses Georgia DOR procedures and forms (separate from the IRS).

Are Georgia state penalties covered by federal relief?

No. Federal relief does not automatically remove Georgia penalties. You must address Georgia DOR separately.

I already appealed a penalty — can I still get relief under Notice 2024-7?

Possibly. If the penalty fits the Notice’s criteria, you may still be eligible for an adjustment or additional relief. A tax professional can review transcripts and prior correspondence to determine next steps.

Call to Action: Don’t Miss Time-Sensitive Refund Opportunities

Potential COVID penalty refund 2026 opportunities can be time-sensitive, and IRS accounts are often more complicated than they appear from a single notice.

Bottom Line Taxes specializes in helping Georgia individuals and small businesses file back taxes, pursue IRS COVID penalty relief, and handle IRS/Georgia DOR communications.

Contact Bottom Line Taxes today to schedule a free initial consultation.

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Office: Serving all Georgia residents — virtual and in-person appointments available

Disclaimer: This article is for general information only and is not legal or tax advice. Eligibility under IRS Notice 2024-7 depends on your specific facts and IRS account history.