If you have been assessed penalties by the IRS, you need IRS penalty relief or IRS penalty abatement. What if we told you that it is possible to reduce your penalties to ZERO?
When we assist clients with IRS penalty relief or IRS penalty abatement, we can often do just that. We can request that the IRS reduce your penalties to ZERO if you qualify for a first time abatement or if you have reasonable cause.
What are IRS penalties?
Many people don’t realize that the IRS charges a penalty of up to 25% just for filing your tax return late. You read that right. You will get hit with an additional 25% of what you owe if you miss the deadline for filing individual tax returns. It’s even worse for payroll tax returns.
There are over 148 different types of penalties the IRS can assess – many of these penalties are substantial. The penalties can even exceed your tax liability! To add insult to injury, the IRS can also charge interest and additional penalties on the original penalty.
The three common types of penalties we see are the Failure to File (FTF), Failure to Pay (FTP), and Failure to Deposit (FTD). We’ll discuss these penalties below.
IRS Failure to File Penalty
You may be assessed the IRS Failure to File Penalty when you don’t file your tax return by the return due date or extended due date if an extension to file is requested and approved. Sometimes we refer to the Failure to File penalty as the FTF penalty.
The amount of the Failure to File Penalty can vary. There is a minimum penalty that can apply if your tax return is filed more than 60 days late. Alternatively, you may be subject to an FTF penalty of up to 25% of the tax owed.
IRS Failure to Pay Penalty
You may be assessed the IRS Failure to Pay Penalty when you don’t pay the taxes reported on your return in full by the due date, April 15. Sometimes we refer to the Failure to Pay penalty as the FTP penalty.
One of the most common reasons our clients are assessed the Failure to Pay penalty is because of a misunderstanding of the due date. Most people know that your income tax return is due on April 15 each year. Sometimes, you may get an extension which moves the due date to October 15.
However, an extension to file doesn’t extend the time to pay. If you don’t pay the tax due prior to April 15, you may be subject to the FTP penalty even if you got an extension! So it’s possible you file a timely return on October 15, but still have to pay the FTP penalty.
The amount of the Failure to Pay Penalty can vary depending on how long it takes you to pay the tax. The penalty increases each month until you reach a total penalty of 25% of the unpaid tax.
IRS Failure to Deposit Penalty
The Failure to Deposit Penalty is assessed if a business taxpayer does not deposit tax in the correct amount, within the prescribed time period, and/or in the required manner. We refer to this penalty as the FTD penalty.
Generally, the IRS sends each business with employees a letter explaining its federal tax deposit schedule, so the business knows how frequently it is required to make its federal tax deposits. This letter also explains that all deposits must be made electronically. If the business fails to make its deposits as scheduled, in the correct amount or in the manner required, the IRS will charge a Failure to Deposit Penalty.
The FTD penalty rates vary depending on how late you are with the deposit. The rates range from 2% to 10%.
Can IRS penalties be waived?
Yes! When we assist clients with IRS penalty relief or IRS penalty abatement, we can often do just that. We can request that the IRS reduce your penalties to ZERO if you qualify for a first time abatement or if you have reasonable cause.
IRS Penalty Relief: IRS First Time Penalty Abatement
While the IRS First Time Penalty Abatement is very limited, it can be a powerful tool when seeking IRS penalty relief. You may qualify for IRS penalty relief under the First Time Penalty Abatement for failure to file, failure to pay, and failure to deposit penalties if you meet the following conditions:
- You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
- You filed all currently required returns or filed an extension of time to file.
- You have paid, or arranged to pay, any tax due.
When are clients are seeking IRS penalty relief, it may require us to file unfiled tax returns in order to be eligible. Don’t worry though, we can take care of that for you too!
IRS Penalty Relief: IRS Reasonable Cause Penalty Abatement
You may be wondering, “what’s reasonable cause?” In our experience in negotiations with the IRS, anything may qualify as long as it’s reasonable. However, the reasonable cause penalty abatement is not easy to get and is by no means automatic. You have to prove reasonable cause to the IRS. According to the IRS, “reasonable cause” is based on all the facts and circumstances in your situation.
The IRS will consider any sound reason for failing to file a tax return, make a deposit, or pay tax when due. Examples of “sound reasons” typically include:
- Fire, casualty, natural disaster or other disturbances
- Inability to obtain records
- Death, serious illness, incapacitation or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family
- Other reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so.
IRS Penalty Relief for Businesses
Good news! If you own a business that has IRS penalties, you may be eligible for IRS penalty relief or IRS penalty abatement through either the IRS First Time Abatement rules or through a Reasonable Cause Abatement.
Even though these are business taxes, the same general rules apply for IRS penalty abatement eligibility.
How to get IRS penalty relief
The only way for us to determine the extent of your penalties and to determine whether you may be eligible for IRS penalty relief including penalty reduction (or IRS penalty abatement), is to sit down with you and conduct a full tax account transcript analysis. This will tell us everything we need to know about your tax account so we can get you started toward IRS penalty relief.
It’s also important to note that IRS penalty relief is not always necessary. If you are settling your tax debt through an Offer in Compromise for example, you may need need IRS penalty abatement since you’re not paying the full tax anyway. Of course, we would discuss your options with you.
Where can I get more information about IRS penalty relief and IRS penalty abatement?
If you’re looking for more information about IRS penalty relief and IRS penalty abatement, you can request a free copy of our book, The Essential Tax Resolution Survival Guide. As part of the ARM Yourself With Knowledge series, this guide aims to help you navigate the tax resolution process and what happens afterward.
Our tax attorneys have experience with IRS penalty relief and IRS penalty abatement
We have experience helping taxpayers like you eliminate hundreds of thousands of dollars in tax debt. When we analyze your tax situation, we try to determine the best course of action for you. We can help you apply for IRS penalty relief!
At ARM Lawyers, our tax attorney handles tax cases nationwide and has offices in Pennsylvania, Maryland, New Jersey, and New York. For more information about the tax process in your state, feel free to click below:
- Pennsylvania tax lawyer
- Maryland tax lawyer
- New Jersey tax lawyer
- New York tax lawyer
If you would like IRS penalty relief, contact us for a free consultation with a tax attorney
If you have IRS penalties, you need IRS penalty relief or an IRS penalty abatement. Call now to schedule your free consultation so we can resolve your debt and start you on your path to relief.
Take back control of your financial future. Providing both immediate relief and long-term solutions, tax resolution could be the answer you have been looking for. Our tax attorneys strive to make this process as easy as possible by offering flexible payment options and financing.
Contact our law office today to schedule a free consultation! Call or reach out to your closest office:
- Stroudsburg Pennsylvania tax lawyer
- Palmerton Pennsylvania tax lawyer
- Bethlehem Pennsylvania tax lawyer
- Elkton Maryland tax lawyer
- Baltimore Maryland tax lawyer
- Morristown New Jersey tax lawyer
- Brooklyn New York tax lawyer
The best part is that we can start the whole process over the phone or by video conference so you don’t even need to come into the office! We make everything as easy as possible for you from start to finish. Call us today.