What is penalty abatement? It is a way to get rid of crazy penalties added to my tax bill!
In some cases, penalties can add up to approximately 25 percent of your total tax bill!
How did I get these penalties in the first place? I filed my tax return late and I did not pay my tax on time!
But hey, if I can demonstrate to the IRS, or to some state taxing authority, that I could not help it, due to certain circumstances that were beyond my control, the Man will cut me some slack!
If I can explain that due to what the taxing authorities, call “reasonable cause”, I was unable to timely file my tax return or to timely pay my tax, the government may deem that I have established “reasonable cause” that may warrant the abatement (removal) of penalties!
What kinds of things constitute “reasonable cause” for penalty abatement? Oh, if there was a death in my immediate family, or if I or someone in my immediate family was seriously ill, or if I was unable to file my tax return or pay my tax due to some natural disaster, such as living in a federally declared natural disaster area, or if I had lost my job due to the economy, or the theft or destruction of tax records, are a few examples.
Basically, some bad karma that you had no control over hit that prevented you from being able to file your tax return on time or pay your tax on time!
If you can qualify for a possible abatement of penalties through the IRS, most state tax authorities will most likely also qualify you for penalty abatement or for a waiver of penalties at the state level as well.
But do not wait for the IRS to review and process a petition for penalty abatement before submitting a petition for penalty abatement with the state.
If my petition asking for penalty abatement is granted then my tax balance will go down by the amount of the abated penalty or penalties, plus the amount of any interest that had been charged against the penalty!
Getting rid of crazy penalties can make it possible to get the remaining tax balance paid off in full sooner than if the penalties and the interest charged against the penalties had not been abated.
But if it is still impossible to pay the remaining tax debt in full, I suggest that you explain to the taxing authorities the circumstances that have prevented you from being able to either timely file your tax return or timely pay your tax and specifically ask for the penalty abatement option and ask if there are any assistance programs available?
Still struggling with your tax problem? I suggest that you seek the assistance of a tax professional who can help you work through a resolution with the tax authorities.
A tax professional will determine if penalty abatement could be among the best options available to help you toward resolving your tax issue.