Failing to pay or file your taxes attracts many penalties. The IRS can slap you with any of the 150 penalties, depending on the cause. It has two main penalties for delayed tax payment and filing. They are:
- A 5% monthly penalty on due balances for delayed filing, capped at 25%;
- A 0.5% monthly penalty on balances for late payment, capped at 25%.
Fortunately, these penalties aren’t death sentences cast in stone because the IRS offers failure to file (FTF) and failure to pay (FTP) penalty abatement. This post shares tips on how you can negotiate favorable abatement and how tax relief services come in handy. Read on to enjoy the much-needed penalty waiver.
Reasons for Abating FTF and FTP Penalties
So, why does the IRS offer genuine taxpayers tax penalty relief? Here are the leading two reasons for abating your penalties.
Reasonable Cause Relief (RC)
The IRS considers different reasons for delayed tax filing and payment. Some of the causes it considers reasonable are:
- Natural disasters or other disturbances
- Inability to get records
- Severe illnesses
- Death of a tax payer’s close kin
It’s worth noting the IRS doesn’t consider the lack of money as the primary reason for delayed filing or payment. Instead, it looks at the reasons for the lack of cash.
- IRS’ First-Time Penalty Abatement Relief (FTA)
The IRS also waivers penalties if the affected taxpayer has a clean compliance track record. The IRS abate their penalties if the affected taxpayer has never delayed filing or paying taxes in the last three years.
Tips for Successful Abatement Request
You can see clearly that the IRS waivers tax penalties if you can convince it to do so. Here are tips to help you get a favorable response to your request.
- Always Request Abatement On Time
Timing is critical if you want to get a favorable response to your request. You must request your abatement within the regular refund limitations. Request the relief three years from the date the returns were filed or two years after the IRS imposed penalties.
- Don’t Accept Every Determination
You don’t have to accept every IRS penalty determination because it may not fully consider your prevailing circumstances. The IRS’s computer system can make a faulty determination that could impose unfair penalties on a taxpayer. The system can reject many valid and reasonable causes. Therefore, you have a constitutional right to appeal the determination and speak to a human who can look into your situation and make a fair, informed decision.
- Draft Your Reasonable Cause Request
Yes, life in the fast lane is busy enough. Thus, many taxpayers call the IRS offices requesting penalty waivers. This method works well only if you are a first-time defaulter. However, things may go wrong if you don’t fall into this category. Therefore, fill Form 843, Claim for Refund, and give all the valid reasons that delayed your tax payment or filing. You can also document your reasonable causes in a formal letter, although Form 843 is the better option.
- Do Live Follow-ups
Do you want to request a penalty waiver? Don’t just request and sit back. You have to follow up on the matter. Remember, the IRS or its employees don’t have a penalty problem; you have a problem, and you should treat it with deserved seriousness. It’s also worth noting that it’s difficult to track an abatement request on an IRS transcript.
So, how can you know that the IRS is working on your request? Of course, by calling the IRS offices to confirm the progress. If you dial and establish that the IRS doesn’t have your request or it got lost, it’s necessary to visit its offices to refile it.
- Prove Your Positive Track Record
You can also secure a positive abatement request if you have a clean track record with the IRS. Remember, the IRS uses penalties to discourage delayed filing or payment. For instance, if you have a reasonable cause for late filing or payment in 2020, you must show your previous compliance history and prove the prevailing circumstances in 2020. A clean payment or filing history will favor your request.
- Optimize FTA
Lastly, optimize your first-year status to get the much-desired relief because every penalty under this category qualifies for it. It qualifies irrespective of whether you are eligible for reasonable cause abatement or not. You can make your FTA request via phone, the penalty figures notwithstanding.
IRS tax penalties aren’t irreversible financial death sentences. You can take advantage of abatement and pay your outstanding tax balances only. Further, enlisting professional tax relief services comes in handy in facilitating the request process.