The process of paying off your taxes and filing tax returns can often be complicated and tedious. If you don’t know what you’re doing, making simple errors can have you facing a penalty from the IRS. Anyone can make mistakes, but it’s helpful to be aware of the kind of penalties the IRS can charge you with and what you can do to get the IRS to remove the said penalties.
Why Did I Get A Notice, Penalty, or Interest
Following are the four most common tax mistake that we all need to avoid.
Failure To File
It’s crucial to know the deadline for tax filing every year. Filing your taxes before due date is the simplest way to avoid penalties, but you can request an extension if necessary. If you miss the due date or fail to apply for an extension, the IRS will charge you with a penalty. The usual liability for missing the tax deadline is 5% for every month that you missed, capping at 25% per cent of your total taxes.
Failure To Pay
Filing your taxes is only the first step. If you file your taxes but then fail to pay them off at the due date, you stand to incur yet another penalty, also a maximum of 25% of the tax due. You can, however, reach an agreement with the IRS for an instalment plan, should you so choose. To avoid a penalty if you can’t pay off the total sum of your taxes by the deadline, try to pay off as much as possible and pay the rest off later.
Failure To Pay Accurate Tax
The IRS’ ‘pay as you go’ mechanism allows taxpayers to pay off their dues every month, rather than all at once at the year’s end. If after the end of the year you still owe upwards of $1000, you may be liable to a penalty for ‘failure to pay accurate tax’. Such a penalty can be avoided by deducting the monthly tax from your paycheck or making estimated quarterly payments.
Though no longer common, the IRS may serve you a penalty of 2% of the bounced cheque’s total amount. The best way to avoid your cheque bouncing is to ensure you have adequate funds in your account before paying taxes.
How To Get The IRS To Remove Penalties
If you’re faced with a penalty you think you don’t rightfully deserve; you can request to initiate a process called ‘Penalty Abatement’ .Once you file an abatement, the IRS will review your tax payment and remove penalties they deem not to be malicious or intentional. Following are the two factors the IRS takes into consideration when examining a penalty abatement.
Can you prove you had a justifiable cause for not paying your taxes? Suppose you failed to file your taxes due to an accident, injury, illness, death in the family, natural disaster, or another incident that was out of your control. In that case, the IRS will most likely agree to penalty abatement.
First Time Penalty
If you have a good history of filing your taxes promptly but only slip up once, the IRS will consider your favorable track record when deciding whether to give you a penalty abatement.
Getting interest rates removed from your taxes isn’t as easy as penalty abatement. Under most circumstances, the IRS only agrees to remove interest on tax payments if they made an arithmetic error, a mistake or caused a delay on their end. That said, if a penalty abatement is approved, the interest on that penalty will also be considered void.
If the IRS determines that you’ll never be able to pay off the total amount under your present financial circumstances, you may be entitled to what is known as a tax settlement or compromise. Under such a compromise, you would be allowed to pay less than the total amount without facing interest or further penalties.
Working With a Tax Representative
It might be best to hire an accountant or some other professional tax representative when dealing with such sensitive matters. A tax representative can conduct a thorough review of your tax papers and ensure that you’re not making any clerical errors when filing your taxes. Accountants can be expensive, but hiring their services can help you avoid tax penalties and even more severe legal repercussions in the future.
When you do incur penalties or other issues with the IRS, your tax representative will handle the paperwork and other necessary processes involved in that as well. These tax representatives have authorized access to information and resources that can make the process of paying your taxes much more manageable, so investing in the services of one is worth considering.
Hopefully, this article helped shine some light on how to get the IRS to remove penalties. Follow us for more financial advice and information.