Penalty Abatement and Removal
IRS usually assesses a penalty when a taxpayer either files late, or pays late.
Very often our clients have reasonable cause when their conduct justifies the non-assertion or abatement of a penalty.
Of course, each case is judged individually based on the facts and circumstances at hand. We will help you understand if your reasons establish that you exercised ordinary business care and prudence but were unable to comply with the tax law and may be considered for penalty relief.
You may incur various IRS penalties, some of the most common are:
- Penalty for Failure to File:
5% of the amount of unpaid tax per month (or partial month) the return is late, up to a maximum of 25%. A minimum penalty of $135 may apply for returns over 60 days late. The minimum penalty is the lesser of $135 or 100% of the tax due on the return.
- Penalty for Failure to Pay:
The failure-to-pay penalty is generally 0.5% per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and start accruing the day after taxes are due. It can build up to as much as 25% of your unpaid taxes.
If you file your federal tax return late and owe tax with the return, both penalties may apply.
You may have to pay a penalty if you file an erroneous claim for a refund or credit. The penalty is equal to 20% of the underpayment, unless the taxpayer adequately discloses a reasonable basis for the way they treated the item at issue, or their position was supported by substantial authority.
The most commonly used type of penalty removal technique is First Time Penalty Abatement. Although it is easy to qualify for First Time Penalty Abatement, it is important to keep in mind that it is designated as a ‘one-time’ option and for that reason, you may want to pursue other penalty removal techniques first. Another useful technique is Reasonable Cause Penalty Abatement. We will help you petition IRS to remove penalties in case of fire, casualty, natural disaster or other disturbances, inability to obtain records, death, serious illness, incapacitation, etc. Finally, there is a procedure that allows penalty removal due to Statutory Exception, which includes erroneous written advise you relied on that was furnished to you by the IRS.
There are many conditions under which late penalties and interest fees can be reduced or minimized. We will help you navigate through the complex forms, procedures, and requirements of getting the penalty abatements you need to bring your tax problems under control.
