Unpaid taxes aren’t the only thing you owe the IRS. Many times, the penalty fees and interest you’re charged if you don’t file or pay on time can make up a large chunk of your debt. Typically, these penalties include 5% of your owed taxes per month and can reach as high as 25% of your balance.
Fortunately, there are ways to get out of paying these extra charges. In some cases, the IRS will remove the penalties and interest applied to your account in a process called penalty abatement.
There are usually two types of penalty abatements. The first is known as a first-time abatement, where you can ask the IRS to waive your penalties for one year. Whether you get approved for this abatement is based on your prior history of paying your taxes and filing on time.
However, this is a one-time deal — you can only request this abatement and appeal the decision once. So, it’s best to make sure you have a strong case before making the request.
If you’re looking to get rid of penalties on multiple tax years, you will need to give the IRS a plausible reason for why you fell behind on your taxes, and prove that you are currently compliant. If you are denied, you can appeal the decision. It helps your case if you can show specific circumstances that prevented you from filing or paying, such as an IRS error or a natural disaster.
Remember, not every request is approved. Get the best chance of having your penalties waived by partnering with a tax professional who can work one-on-one with you.
Schedule a free consultation with one of our tax associates and see how we can help you leave your debt behind.