Tax Penalty
You may find yourself overloaded with tax penalties in any given year. There are a few ways you can lower the burden caused by late or incomplete taxes. Here are some guidelines, tips, and recommendations from tax experts on lowering your costs.
Penalties Eligible for Penalty Relief
When it comes to circumstances outside your control, such as financial hardship, family loss, or incorrect information on your tax form, the IRS is willing to lower your penalties. Certain penalties, though, are not eligible for reduction or relief. Check to see if you incurred any penalties for:
- Failing to file a tax return
- Failing to pay on time
- Failing to deposit certain taxes as required by law
- Incorrect filing or ineligible credits
If any of these situations apply to you can speak with a local tax specialist to set up a game plan to lower your tax penalties and interest. Before you can speak to the IRS about lowering the amount owed (always talk to a tax professional), you have to go through one of the special processes offered by the IRS. These are different types of penalty relief you can find on IRS.gov.
Types of Penalty Relief
There are different types of penalty for different scenarios. Make sure you find the best relief for you. Types of Penalty relief offered by the IRS are:
- Reasonable cause
- Administrative waiver and first time abatement
- Statutory exemption
Reasonable Cause
For reasonable cause you must establish a legitimate reason for not paying your taxes on time. You must also establish a reason why you did not have the funds to pay for the taxes. Disasters, illness, bereavement or family death, absence of taxpayer, theft, and loss of home are some of the reasons you can claim reasonable cause penalty relief. Before listing any of these reasons consult with a tax specialist. The IRS will frown heavily upon erroneous mistakes.
Administrative Waiver and First Time Abatement
The administrative waiver and first time abatement program is designed for first time tax payers or those who had no penalties for the last 3 years. Simply put this program allows those who have acted in good faith to have some mercy bestowed on them by the IRS. For those who received incorrect information orally on behalf of an IRS representative the administrative waiver is for you. If you have already paid or filed all required paperwork including extensions you are also eligible for this program. The rules and guidelines for first abatement can be found on this irs.gov webpage IRS First time Abatement Policy.
Statutory Exemption
If you were furnished with incorrect information from the IRS you can file for penalty relief. All you need is written proof of your request for information, the name of the agent, and the incorrect information offered to you by the IRS agent. An abatement form may be required. You will want to discuss this with your tax representative and call the IRS’s toll free number to request filing forms.
Interest Relief
If you want to lower your interest rate you must first have the penalty reduced or removed. Penalties typically start accruing 20% interest and can be set as high as 75% for tax fraud. If your tax representative does not specialize in your particular line of work, you need one who does. A reliable representative can help you prevent tax fraud and other mistakes on your taxes. Try to find a legal representative if you believe you provided information to the best of your ability. Make sure you stay up to date with all tax regulations on irs.gov. if you are a small business owner in a jam “Don’t Panick! Call Franek!”
Sources
https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief, Penalty Relief, irs.gov, 12/09/2021
https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-reasonable-cause, Reasonable Cause, irs.gov, 11/16/2021
https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-first-time-penalty-abatement-or-other-administrative-waiver, Penalty Relief Due to First Time Penalty Abatement or Other Administrative Waiver, irs,gov, 11/16/2021
https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-statutory-exception, Penalty Relief Due to Statutory Exception, irs.gov, 11/16/2021