What You Need To Know About IRS Penalty Abatement Types

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You can't escape paying taxes, but there are some debts for which the IRS is surprisingly lenient. You may be eligible for a one-time IRS penalty abatement if you have any outstanding fees due to late tax filing or payment. You can request the IRS to waive the penalty fee if you cannot pay your taxes despite your best efforts. Although denial of some abatement requests is inevitable, the odds of success improve if you can prove a valid reason for your overdue payment and have a particular kind of late penalty. This article will cover all aspects of IRS penalty abatement.

Types of Penalties Eligible for Abatement

There are specific conditions under which the IRS will waive particular late fees. You may be qualified for what the IRS refers to as a "First Time Abate" if you have accumulated a fee for one of the three reasons listed below. Keep in mind that this does not apply to all fines. Taxpayer eligibility is conditional on the taxpayer's payment or nonpayment history and the reason for failure.

• Failure to File

Not submitting your tax return by the specified deadline will result in a fee known as the Failure to File penalty. The fee can be as high as 25% of your outstanding tax bill or 5% of your unpaid monthly taxes for five months. There will be interest charges on top of the fee.

You can avoid asking for a reduction of this fee if you provide documentation demonstrating a valid reason for your late filing. What constitutes reasonable cause is situational and may include:

Disasters such as fires, floods, or civil unrest

Problems obtaining records

The taxpayer's or their immediate family's death or severe illness

Postponement of electronic submission or payment

• Failure to Pay

You will be subject to the Failure to Pay penalty if either you failed to pay your taxes by the due date or you paid them on time but failed to disclose all of your taxable income. At first, the penalty is 0.5% per month of the outstanding balance (up to 25% of your total tax bill), but it rises to 1% per month on the 10th day following the date of notice from the IRS.

Unpaid balances are subject to interest charges by the IRS as well. An approved payment plan can help you reduce the Failure to Pay fee. You can also get this fee waived if you can show that there was a valid reason for your payment being late, just like the Failure to File fee.

• Failure to Deposit

A Failure to Deposit penalty applies to employers who do not pay their share of employment taxes, which includes income tax and Social Security. Employers are subject to this fee if their employment tax deposits are either late, incorrect, or unpaid.

Depending on the severity of the delay, the late fee can be anywhere from two percent to fifteen percent of the unpaid deposit plus interest. A fee dismissal without an abatement request may be possible if you show a valid reason for the failure.

Conclusion

When dealing with back taxes, an IRS penalty abatement might help. Unintentional infractions due to financial constraints or incorrect advice are the root cause of penalties for many taxpayers. Applying a penalty abatement on the highest penalty may be prudent when your liability extends over several years. To obtain the IRS penalty abatement you require, it is advisable to retain the services of a knowledgeable free consultation tax attorney in California CA USA.