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Tax Penalties & Penalty Abatement

12/16/13

You could end up owing the IRS taxes and penalties if your IRS tax returns are not filed correctly or if you do not file your return at all.   Not only can the IRS assess penalties on your unpaid taxes, they also charge interest on the total of both the back taxes and penalties, which will add up quickly if not addressed.

For instance, if you file a tax return late, the IRS will charge 5% of the taxes you owe each month, up to 25% of what you owe that year.  The interest that the IRS charges is calculated from the total of the original amount of the tax due plus the penalties. Interest will continue to accrue until the total amount of tax debt owed becomes unmanageable.  If you can avoid the penalties, you will avoid being charged more interest as well.

If you find yourself in the unpleasant position of having the IRS assess penalties on your tax debt, here are a few things to keep in mind and some steps you can take.

Key things to keep in mind when dealing with the IRS

  • Resolution can be a complicated and time-consuming process.
  • Appropriate wording is crucial when it comes to abatement of penalties.
  • Tax professionals familiar with IRS collection procedures can make all the difference when dealing with the IRS.

Steps you can take

  • Fill out IRS form 843, Claim for Refund and Request for Abatement.
  • If you have any special circumstances that created your tax debt, such as health issues, divorce, a death in the family, or any other special circumstance, share that in writing with the IRS on the penalty abatement form.

If you have ballooning tax debt, due to excessive penalties and compounding interest, contact the Tax Group Center for a free consultation and find out whether penalty abatement is an option for you.

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