How Can CPA Venice Help You Reduce or Remove Common IRS Tax Penalties?

by Harley Green Accountant

To most small business owners, there’s really nothing worse than paying taxes- except finding out what you owe even more than you planned for IRS penalties.

These can amount to hundreds if not thousands of dollars of unwelcome or unexpected charges.

When you receive a letter from the IRS, all you think about is what if you don’t pay the tax. Only a few small business owners actually understand the legal ways to get out of paying IRS penalties.

So before you hastily write a check to avoid having to think about it anymore, it’s worth exploring avenues for getting the penalties forgiven with the help of your CPA Venice.

Here are some common penalties small business owners face, and the steps you can take to try and reduce the penalties.

1. Late Payment Or Filing Penalty

The most common penalty folks face is for filing and or paying their tax returns late. For late filing, the IRS charges 5% of the tax owed for every month the return is late up to a max of 25%.

For late payment, you can expect a 0.5% fee on the unpaid taxes, again up to 25% of taxes owed.

The first way to avoid a penalty is to ask for permission rather than forgiveness- if you know you are going to need extra time for filing the returns, file for an extension before Tax Day.

2. Failure To Pay Estimated Taxes

Another common penalty for small business owners is failing to pay estimated taxes throughout the year- similar to paying these taxes since the government didn’t have their money when they were expecting it.

This is less than a flat fee and is calculated based on how late the tax is considered to be and what the interest rate that time was.

You can also hire a CPA Venice for further assistance since he has enough knowledge of it. Also, you can avoid the penalties in the first place by remembering to pay estimated taxes every quarter, or increasing the contribution to cover the taxes you’ll owe from side income.

However, if you have forgotten to pay the estimated taxes, you need to pay up. But if you didn’t pay at some point because of casualty, disaster or unusual circumstances, you may be able to remove the penalty.

3. Set Up A Monthly Payment Plan

The best way to stop interest from building up is to pay the full tax bill. But if that’s not possible, you have options.

If you set up a monthly payment plan with the IRS, they may cut your failure to pay penalty in half. Less penalty means less interest.

The IRS offers several installment agreements with various terms. The CPA Venice can help you evaluate which option will work best for your situation and work with the IRS to set up an agreement.