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penalty abatement of taxes

Penalty Abatement of taxes

September 02, 2014

Ideally, cooperation with the IRS by filing and paying your taxes on time is advised for tension and penalty-free tax life, but if you haven’t, do not panic. Penalties can still be abated if you have a reasonable cause. The IRS applies penalties for filing a tax return late and/or failing to pay taxes you owe by the deadline. Generally, failure to file tax returns calls for a greater penalty than failure to pay them.

IRS Penalty Amounts

The failure-to-file penalty is 5 percent of the unpaid taxes for every month or a part of the month in which the tax return is late. After the tax filing due date, the penalty will start to accrue but cannot exceed 25% of your unpaid taxes.

In the case of a failure-to-pay penalty, if you are unable to pay by the tax deadline half of the one percent (0.5%) will be charged as a penalty, again up to 25% of the unpaid taxes. This penalty starts to accrue after the due date and it applies to each or a part of a month.

Reasonable Cause Relief

“Reasonable cause” relief comes to the rescue in such situations. It can help get your penalty abated. If the taxpayer exercises general business care for their tax obligations but failed to comply because of the reasonable cause guidelines, penalty abatement may be within reach. Your application for penalty abatement will be reviewed by a revenue officer and he will be the final decision-maker. Cases are judged individually; judgments are based upon presented evidence, facts, and circumstances.

Some of the accepted “reasonable causes” include:

  • Death of a family member
  • Serious health problem
  • Bad or erroneous financial advice
  • Flood, hurricane, fire, or other natural disasters
  • Theft of funds, including embezzlement
  • Lost or destroyed records
  • Divorce that caused extreme stress and deteriorated your financial condition
  • Unemployment for an extended period of time
  • Fixed income or retiree
  • The financial strain caused by caring for another person

Tax debt is often a time of financial hardship for taxpayers. It is a good idea to hire professional help because tackling the IRS is difficult and unpredictable. Licensed tax professionals from a reputed organization are experts in handling your situation.