When a taxpayer owes back taxes, the IRS and/or State Taxing Agency will assess penalties and interest to the amount due. These penalties, in particular, can turn a fairly manageable debt into an overwhelming amount overnight. Luckily, the Penalty Abatement program is available for taxpayers.
Standard Penalty Abatement
The IRS may remove penalties from a tax debt due to specific, extenuating circumstances. The submission requires precise wording on the explanation of what caused the tax debt and most importantly, a full understanding of the IRS Code and Procedure. Loss of records, death of a spouse, health issues, and natural disasters, are just a few examples of reasonable cause.
First Time Penalty Abatement
The IRS may remove penalties (Failure to File Penalty and Failure to Pay Penalty) from a tax debt if the following is accurate:
- The taxpayer didn’t previously have to file a return or the taxpayer has no penalties for the 3 tax years prior to the tax year in which he/she received a penalty.
- The taxpayer filed all currently required returns or filed an extension of time to file.
- The taxpayer has paid, or arranged to pay, any tax due.