IRS Penalty Abatement: Know Your Rights?

IRS tax penalties and interest charges can cause emotional distress and financial hardship. But make sure that before you attempt to tackle the issue, you understand exactly why these penalties were imposed and what your legal options are to get them removed or settled.

Late filing penalties are one of the penalties that cause taxpayers a great deal of concern. They amount to 5% of the unpaid tax balance for each month or part of a month. The maximum late filing penalty is 25% of the assessed tax.

Failure to pay penalties are 0.5% of the initial tax bill. These penalties are also capped at 25%. Should you ever find yourself in a situation where you cannot afford to pay your tax bill at least you need to file your return.

Taxpayers are often amazed (and of course disappointed) when they file their returns 6 months or so late and find out that their penalties and interest amount to 30-40% of the initial tax bill! This is what can put taxpayers into a financial mess that is hard to get out of.

Abatement of IRS penalties can occur, but only if the taxpayer can show reasonable cause. Reasonable cause for late filing includes: (1) the death or serious illness of the taxpayer or an immediate family member of the taxpayer; (2) the unavoidable absence of the taxpayer on the filing date; or (3) the destruction of the taxpayers business or personal residence.

The IRS can abate interest charges only in certain situations. These include situations in which there was an unreasonable error or delay by IRS employees or if the late payment occurred in an area that was a presidentially declared disaster area.

With more and more Americans facing IRS penalties and interest charges, people need to make sure that they are educated on the topic. If you find yourself falling behind with the IRS, do everything in your power to get caught up. They wont go away unless you address the issue head on.

This entry was posted on Saturday, October 3rd, 2009 at 5:47 pm and is filed under IRS Interest Abatement, IRS Penalty Abatement, Income Tax Penalties, Tax Penalty Abatement. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.