What is penalty abatement?
It is a penalty waiver granted on a State government or IRS level for those who received fines regarding late or unfiled taxes. Many take advantage of this program as it is a way to get rid of tax penalties that can add up to approximately 25 percent of total tax bills!
How does it work?
Individuals or businesses must request the IRS to receive abatements that failed to pay or file taxes.
Reasonable Cause Penalty Relief:
Explain circumstances beyond the individual’s control that demonstrate both the IRS or a state taxing authority’s inability to file for taxes. Examples of the following are:
- Natural disasters
- Inability to obtain records
- Death, serious illness, lost job due to poor economy, etc.
The government may deem a case with a reasonable cause by warranting the abatement (removal) of penalties. However, the individual must prove their circumstance to be a reasonable cause, for their inability to timely file tax returns or pay taxes.
First-time penalty abatement (FTA):
The first incident recorded in which an individual needs to apply for penalty abatement. The following circumstances fall under the category of (FTA):
- The individual or entity did not previously file a return or have penalties for the three tax years before the filing tax year in which the penalty was received.
- All currently required tax returns or extensions are filed.
- An individual or entity has payment arrangements for any and all taxes due.
In many cases (but not all), if an individual qualifies for IRS abatements they are likely to qualify for fines on a state level as well. Also, the sooner one requests their tax abatements, the sooner their fines are waived, the lower their interest payments are. Therefore, being proactive with late and unfiled taxes is essential if you’re looking to resolve this case quicker.
Still impossible to pay the remaining tax liability in full? An individual should contact tax professionals who can assist them in resolving this issue. You can call or contact a Tax agent here at Coast One Tax Group who would be happy to resolve your tax issues.