The IRS doesn’t abate the vast majority of penalties. Why? Most likely because people are unaware of how to request penalty relief or because they believe it won’t be worth their time or effort. Here’s why it is worth it.
The IRS frequently employs penalties as a means of pressuring us to abide by the law and maintain our compliance. Each year, the IRS assesses tens of millions of penalties totaling billions of dollars. But the IRS also provides several options to get penalties removed, or abated, for people who qualify.
Here is the skinny on how to avoid having to pay those annoying IRS fines and interest.
Let’s face it nobody enjoys dealing with the IRS. Between understanding complex tax codes and navigating bureaucratic processes, it can feel like a never-ending headache. But what if I told you that there’s a way to avoid paying those dreaded penalties and interest?
That’s correct—the IRS isn’t as cold-hearted as you may have assumed. Sometimes, they will even waive those annoying fees, providing you with a much-needed respite.
So. when can you expect the IRS to show some mercy?
First-Time Penalty Abatement:
If you’re a first-time offender when it comes to tax penalties, you’re in luck. The IRS offers a First-Time Penalty Abatement program that can forgive certain penalties. This program is like a get-out-of-jail-free card for those who have made an honest mistake
Reasonable Cause:
Even if you’re not a first-time offender, you may still be able to get your penalties waived if you can demonstrate reasonable cause for not complying with tax laws. This could include things like a serious illness, a natural disaster, or even a death in the family.
Statutory Exception:
There are also a few statutory exceptions that can lead to penalty relief. For example, if you’re a victim of identity theft or you’re unable to pay your taxes due to financial hardship, you may be eligible for penalty relief.
How to Request Penalty Relief:
That being said, the procedure for filing a request for penalty relief is actually fairly simple.
1. Follow the instructions in the IRS notice you received. This notice will usually outline the specific steps you need to take to request relief.
2. You may also be able to request relief over the phone. When you call the toll-free number provided on your letter or notice, have the following details available:
- The notice or letter you received
- The penalty you want relieved
- The reasons you think the IRS should remove it
3. If you can’t resolve the penalty over the phone, you can request relief in writing. Use Form 843, Claim for Refund and Request for Abatement.
4. Be prepared to provide documentation to support your claim. This could include things like medical records, a police report, or financial statements.
Interest Relief:
The good news is that if you’re granted penalty relief, the IRS will also automatically reduce or remove any related interest. This can save you a significant amount of money, especially if you have a large tax bill.
Don’t Give Up!
If you’ve received a notice from the IRS about penalties or interest, don’t despair. There’s a good chance that you may be able to get relief. Take the time to understand your options and follow the steps outlined above. With a little effort, you may be able to save yourself a lot of money and avoid the stress of dealing with the IRS.
Additional Resources:
- IRS Penalty Relief: https://www.irs.gov/payments/penalty-relief
- IRS First-Time Penalty Abatement: https://www.irs.gov/newsroom/irs-provides-penalty-relief-for-2020-and-2021-tax-returns-help-paying-taxes
- IRS Reasonable Cause: https://www.irs.gov/newsroom/irs-provides-penalty-relief-for-2020-and-2021-tax-returns-help-paying-taxes
- IRS Statutory Exceptions: https://www.irs.gov/newsroom/irs-provides-penalty-relief-for-2020-and-2021-tax-returns-help-paying-taxes
- Form 843, Claim for Refund and Request for Abatement: https://www.irs.gov/forms-pubs/about-form-843
Remember, you’re not alone in this. There are plenty of resources available to help you navigate the IRS and get the relief you deserve.
The most common IRS penalties are for not filing and not paying
Almost all of the penalties are found in the Internal Revenue Code, but a few common penalties account for the remaining percentage (2074%). The most common penalties are:
- Failing to pay penalties: 20% of all penalties, assessed if you fail to pay taxes on time (E2%80%93%2056% of all penalties)
- The penalty for failing to file is 20% of the total penalties, which are imposed if you do not file a return on time.
- Failure to deposit the penalty, which is 20%E2%80%93%204% of all penalties imposed when a business fails to pay employment taxes on time or pays them incorrectly
A frequently encountered nuisance penalty is the late-filing penalty for partnerships and S corporations. Another frequent penalty that taxpayers frequently contest by making an exception on their tax return is the estimated tax penalty.
Statutory exception: proving a specific authoritative exclusion to the penalty
Statutory exceptions are uncommon and are easily explained to the IRS, mostly at tax filing. Examples include disaster relief or combat zone relief.
How to Get the IRS to Forgive Your Penalties and Interest – Tax Hack
FAQ
How do I get my IRS penalty and interest waived?
Can you negotiate with IRS to remove penalties and interest?
Will the IRS forgive my tax debt?
Does IRS interest ever stop?
When does the IRS waive tax penalties?
Carl R. Johnson, a certified public accountant in New Orleans, says the IRS is waiving only the penalties charged during a set period: from the date that the IRS sent its initial balance due notice to the taxpayer (or February 5, 2022, whichever is later) to March 31, 2024.
Will the Internal Revenue Service waive penalties for late tax returns?
You may qualify for relief from a penalty by administrative waiver if it’s your first tax penalty or you meet other criteria allowed under tax law . The IRS provides penalty relief for 2020 and
Can a tax penalty be waived?
The IRS may also be able to waive penalties if a Statutory Exception exists. Tax legislation may provide an exception to a penalty. Specific statutory exceptions can be found in the penalty-related Internal Revenue Code (IRC) sections. These would include situations like receiving erroneous written advice from the IRS.
Can the IRS reduce the amount of interest I owe?
Interest is required by statute, but the IRS may reduce the amount of interest you owe if the interest is applied because of an IRS officer or employee’s unreasonable error or delay. You must meet the following 6 criteria for your interest abatement request to qualify for unreasonable error or delay under IRC 6404 (e) (1):