The debt does not go away if you do not pay your taxes when they are due. It may increase as interest and penalties accrue each month. The IRS revenue agent will continue to collect the tax you owe, but if you can establish that you have a legitimate cause, and with the help of your IRS Tax Audit Help, it may be willing to waive or decrease the penalty costs.
What to do if you think you owe a Penalty
When IRS charges you a penalty, it will send you a notification or a letter.
In the notice or letter, the penalty, the basis for the accusation, and what to do next are all detailed. These notices and mailings have an identification number.
Different types of penalties
IRS sends letters and alerts for the following penalties:
- Taxpayers who fail to file or furnish their mandatory information return or payee statement by the deadline are subject to the Information Return.
- If you don’t file your tax return by the deadline, you’ll be charged with failure to file.
- The term accuracy-related refers to when you do not claim all of your income or claim deductions or credits that you are not eligible for.
- If you don’t pay your employment taxes accurately or on time, you’ll be charged for failure to deposit.
- Penalties are imposed on tax return preparers who commit fraud.
- Dishonored Checks occur when your bank refuses to accept your check or another form of payment.
- When a corporation fails to pay estimated tax precisely or on time, it is known as underpayment of estimated tax.
- Underpayment of Estimated Tax is a penalty imposed on people who do not pay estimated tax correctly or on time.
System of interest on penalties
The word “penalty interest” refers to the amount of interest levied on a penalty. Interest is charged on fines.
Depending on the type of punishment, the IRS charges interest on a different day. Interest is charged on the amount you owe until it is paid in full. For further information on the penalties it imposes, see Interest on Underpayments and Overpayments.
Late payment and overpayment interest rates vary and may fluctuate regularly. The modifications do not affect the interest rate charged in past quarters or years. See Quarterly Interest Rates for more details.
Relief from Penalties:
If circumstances beyond your control prevented you from paying your tax obligations despite trying to follow the law, then you may be entitled to penalty relief.
If you’ve got a notice, double-check that the information it contains is correct. If you can correct an issue in your letter, you may not face a penalty.
Penalty reduction is available for the following offenses:
- It is a significant offense to fail to file a tax return.
- Failure to make payments on time
- Failure to make timely deposits of certain taxes
Penalty Relief Types
Penalty relief is available from the IRS in the following ways:
The reasonable justification
Penalty Reduction and Administrative Waiver for First-Time Offenders
Exceptions to the Statute of Limitations
The Penalty Appeal Tool is an online tool that allows you to appeal a penalty.
You can choose the Penalty Appeal Online Self-help Tool if IRS denied your request for penalty relief in a notice or letter.
Is it possible to prevent having to pay interest?
The IRS revenue agent does not waive interest for reasonable cause or as a first-time remedy. According to law, interest must be charged until your account is settled in full.
If any of your penalties are lowered, IRS will instantly reduce the relevant interest.
Eligibility for a Penalty Appeal
You may be entitled to request an appeal conference or hearing if the IRS declines your request to remove a penalty. In most cases, you have 30 days from the date of the refusal notification to file an appeal request. The deadline is specified in your rejection letter. You can take help from an IRS Tax Audit Help for this appeal process.
If all of the following have occurred, you may file an appeal:
- You received notice from the IRS that a failure to file and pay a penalty had been imposed on your personal or business tax account.
- In a letter to the IRS, you requested that the penalty be waived.
- Your request to have the penalty waived was denied by the IRS (penalty abatement)
- You received a Notice of Disallowance informing you of your right to appeal.
Penalties for Non-Payment of Taxes: What to Do
In most cases, the IRS will keep trying to collect the tax you owe, but if you can show it has a cause, the IRS may be willing to waive or lower the penalties.
Look at abatement possibilities.
Check to see whether you qualify for a discount based on your circumstances. Considering suspension of penalties is an option if circumstances beyond your control caused their inability to pay on time. For example, a death in the family, illness, imprisonment, hurricane, or loss of documents may result in the suspension of penalties.
Gather your proof
Gather evidence of your claims to bring to the IRS revenue agent. Make sure you have proof of residency if you live in a federally declared disaster area where the IRS is issuing penalty waivers. Your medical bills or records that may prove the dates can be valuable if you haven’t paid because you were in the hospital. If you don’t have any paperwork, the IRS is unlikely to consider removing or reducing your fines.
Submit your waiver request.
In writing, request a penalty waiver from the IRS. Instead of the originals, provide copies of the documents you’re presenting as evidence, and explain why you weren’t able to pay. The letter should be addressed to the same IRS address as the penalty notice. If you prefer, you can speak with an IRS representative over the phone.
Try again if you do not succeed the first time.
You have the right to submit an appeal if the IRS rejects your request. The IRS usually answers within 60 days after receiving your request. If you’re not satisfied with its response, you may always write back with more information and request a rethink. If your second letter does not resolve the issue, you have the option of contesting the IRS’ penalty assessment.
If you acted on incorrect advice from an accountant, the IRS revenue agent may be ready to pardon your penalty in exceptional circumstances.
How to obtain the help of a professional
IRS Tax Audit Help can help you navigate an IRS audit and communicate with the government.
- Bring the eight items listed below to your appointment.
- The IRS revenue agent may seek any information or documents.
- A copy of the tax return is being challenged
- Copies of your tax returns for the two years before the tax year under consideration
- A copy of the most recent year’s return is necessary if the return being audited is not the most recent year’s return.
- A copy of any documents you provide to your tax preparer
- Any records containing the results of prior audits.
- A copy of any other IRS letters or notices you may have received during the tax year.