IRS is a statutory body responsible for enforcing tax laws and collecting taxes from individuals and businesses. They use different means to ensure taxpayers meet their tax obligations, including imposing penalties and interests. The IRS also charges interests on penalties at a compound rate on penalties, increasing taxpayers’ tax debts. Increased tax debts overburden the taxpayers and create financial hardships. This is where penalty abatement comes in – it protects taxpayers from experiencing financial difficulties. To qualify for penalty abatement, taxpayers must meet certain criteria. Residents of Dallas, Texas who need help in determining their eligibility or applying for penalty abatement can consult an experienced tax attorney. In this blog, we answer some of the frequently asked questions about IRS penalty abatement. Read on.
What is Penalty Abatement?
The IRS imposes penalties and interest on taxpayers who do not comply with IRS tax laws. However, if taxpayers fail to comply with tax laws due to reasonable causes and statutory exemptions, the IRS grants penalty abatement, which is a debt relief scheme designed to reduce the tax burden of taxpayers. With penalty abatement, taxpayers receive a waiver from the IRS on the penalty amount incurred on unpaid taxes. Additionally, the interest accrued on the waived-off penalty portion can also be abated to further decrease the tax burden. Once penalty abatement is granted, taxpayers only need to pay their unpaid tax amount.
What are the Common Criteria for Penalty Abatement?
The common criteria for penalty abatement are:
- First-Time Penalty Abatement (FTA) - is the most common criterion for IRS penalty abatement, granted to taxpayers with good compliance history, who have defaulted for the first time. The IRS grants FTA on one of the three penalties; Failure-to-Pay, Failure-to-File, and Failure-to-Deposits for a single tax period, irrespective of the penalty amount.
- Reasonable Cause - When taxpayers fail to comply with IRS tax laws due to unavoidable circumstances such as civil disturbances and serious illness, accuracy-related, the IRS can grant penalty abatement under reasonable cause.
- Statutory exemption - The IRS grants penalty relief under the statutory exemption if the taxpayers receive a penalty even though they have mailed on time, are in a federal disaster area, or have received incorrect advice from the IRS.
How to Qualify for IRS Penalty Abatement?
The IRS checks the past and current tax compliance of taxpayers to determine their eligibility for first-time penalty abatement. For penalty relief under reasonable cause, taxpayers are required to prove they acted in good faith but couldn’t file due to reasons specified by the IRS for the type of penalty. For relief under the statutory exemption, the criteria differ as per the type of exemption. Judging qualification for the eligibility criteria for penalty abatement can be difficult for taxpayers, which is why it's advisable to consult an expert tax attorney.
Conclusion
Abatement of penalty by the IRS reduces the overall tax burden of taxpayers. To determine your eligibility for penalty abatement and create a solid case, you can consult experienced tax attorneys. They possess deep knowledge of the IRS tax codes to help you interpret and apply for debt relief. They can assist you in filing tax returns and paying taxes on time to avoid IRS penalties and interest in the first place. Dallas residents looking for legal assistance related to penalty abatement can consult a trusted Texas tax attorney experienced in resolving IRS issues.
There are multiple types of penalties the IRS can penalize a taxpayer.
If you file your tax return late, the IRS will assess you for failure to file a penalty.
If you do not pay your taxes by the due date, the IRS will assess you for failure to pay penalty.
A Houston tax attorney at Kreig Mitchell LLC will assist you in compiling your penalty abatement request and establishing reasonable cause to have the penalties waived.
We helped taxpayers deal with the IRS for several years.
You will gain the expertise of licensed tax attorneys, CPAs, enrolled agents, and tax agents when you let us explore erasing IRS tax penalties and interest rates, along with other tax problems that are creating a huge burden in your life.
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From my experience, returns are frequently picked inside two years from the archiving of the cost frame.
Field surveys included keeping an eye on a subject's records and books through gatherings driven by a salary authority.
Office surveys are more amazing and incorporate request of reality issues, for instance, if wage was totally uncovered.
Regardless, an evaluation attorney can prepare you and help you through the experience of examination.
A bank gather must be released inside 21 days from the date it was issued.The IRS just snatches the benefits in the record when the interest was put.
