About IRS & State Tax Penalties
Did you fail to pay your taxes on time? Did you fail to timely file your tax return? Did you run afoul of the other Code sections that allow the IRS or states to assess penalties?
Have you received one (or more) notices from the government saying that you owe a significant amount in penalties?
If this is the case, you are certainly not alone. The IRS and states impose penalties on millions of taxpayers each year.
The first and most important thing to do is pause to think about the circumstance that led to the penalty and take steps to ensure that you will not incur additional penalties. Then, it is time to think about how to deal with the penalties that have been assessed.
The most common reasons for tax-related penalties.
There are over 150 different civil tax penalties provided in the Federal tax code. These penalties range in severity, which is reflected by the varying dollar amounts of the penalties.
Most penalties are assessed automatically by the IRS computers. So it makes sense that there are sometimes errors and that your unique circumstances are not factored into the decision as to whether penalties are even proper.
Here are some of the most common reasons for tax penalties:
- Not filing on time
- Not paying taxes on time
- Filing a frivolous return
- Accuracy and negligence issues in reporting taxes on your tax returns
- Intentional disregard of the rules in reporting taxes on your tax returns
Assessed a penalty in error?
It is up to you to make a case that penalties should not be assessed in your case. It is a highly fact-intensive analysis that requires practical knowledge of what the IRS and states view as acceptable and not acceptable when it comes to taxes and tax returns. This is why it’s important to see a tax professional if you think you penalties should not apply.
There are several avenues for obtaining penalty relief that should be considered. If you have not had any previous issues with the IRS, it may apply a first-time abatement policy if you request it. If you act in good faith and demonstrate compliance, the IRS may also abate penalties. For other penalties, the IRS also has various resolution programs, such as the offshore voluntary disclosure program and streamlined filing procedures for foreign accounts and reporting.
If you have received an IRS notice indicating that penalties are due, contact us right now and let us help you find a solution.
Why penalty abatement may work for you.
If you are facing tax penalties, you will probably have a sense of how quickly the penalties and interest on the penalties can add up. Keep in mind that interest is not normally a charge that can be reversed; however, penalties can often be abated with the help of a tax professional.
If you have special circumstances which made it impossible to pay your taxes on time, you can request that the penalties be removed and may have a good chance of having them removed. The same goes for filing a late tax return.
In order to get penalties abated, you need to prove your case. Some examples of legitimate reasons for this include:
- Family death or illness
- IRS errors
- An incorrect address or postage amount
- Destruction of records for reasons outside of your control (e.g., a fire, a natural disaster, etc.)
- An absence that was beyond your control (e.g., a required hospital or prison stay)
- Incorrect instructions given by the IRS or a tax professional
- A liability stemming from an unusually complex area of tax law
Act now to get your penalties abated.
If you believe that you have circumstances beyond your control and that you have been contacted by the IRS or states about penalties, contact us as soon as possible.
We are former IRS attorneys, appeals officers, and auditors who help taxpayers with penalty abatement requests. We offer compassionate, individualized service at manageable rates.
Call today for a confidential consultation. Our number is 800-521-0230.
More About IRS Penalties
- Does Late Payment Tax Penalty Run from Extended Due Date?If you file an extension for an estate tax return and pay the tax before the extended due date, can the IRS impose penalties for late payment? The court addresses this in Estate of Agnes R. Skeba v. United States, No. 3:17-cv-10231 (D.N.J. 2019). Facts & Procedural History The taxpayer is an estate. It’s estate tax return was due in March of 2014. The estate timely-filed a Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate . . . Taxes. It included a partial payment with the form and a cover letter explaining the… Continue reading Does Late Payment Tax Penalty Run from Extended Due Date?
- Using the CDP Hearing to Challenge Tax PenaltiesThere are times when it is important to pick the right method of approaching a problem with the IRS. The VICA Technologies v. Commissioner, T.C. Summary Opinion 2019-7, case provides an example of contesting penalties in an IRS collection due process hearing. Facts & Procedural History The taxpayer was assessed a Sec. 6698(a) penalty for filing its partnership tax return late. The taxpayer filed one month late. The taxpayer filed a penalty abatement request. The taxpayer argued that the tax returns were filed late due to it accountant and financial situation that did not allow it to fully pay its… Continue reading Using the CDP Hearing to Challenge Tax Penalties
- How to Avoid the Estimated Tax PenaltyThe IRS imposes penalties for a number of different types of conduct. Many of these penalties can be abated or removed based on reasonable cause. Reasonable cause refers to there being extenuating circumstances. The estimated tax penalty is different, as extenuating circumstances are largely irrelevant. This makes it even more important to pay estimated taxes and to do so timely. About Estimated Tax Payments You are required to advance taxes as income is earned to avoid having a significant shortfall in the balance on account with the IRS when the taxes are due. If there is a significant shortfall or… Continue reading How to Avoid the Estimated Tax Penalty