Sometimes we have clients come in who are able to pay their tax debt in full. They have filed all of their tax returns on time every year but they have a really good reason that they got behind. While they may end up paying the amount of taxes due in full, they could qualify for a penalty abatement.
When you file taxes and do not pay, a penalty called the “failure to pay” penalty begins to accrue. It builds up at a rate of a half a percent per month, or six percent per year, maximizing at 25% of the total tax bill. The IRS will waive this penalty by granting a penalty abatement under certain circumstances.
Here are some of the cases in which the IRS will entertain a request for penalty abatement:
If you did not pay the tax due to a health issue
If you were incapacitated due to health or other problems
If you were suffering from a severe personal hardship that made it impossible to pay the taxes
If paying the tax would have created an economic hardship
Any other extenuating circumstance.
Now, abating these penalties is not as simple as calling the IRS and requesting that they be abated; the IRS wants to see documentation. For example, if you were in a coma for two years, you should have medical records showing that. If you were laid off from your job, you will be expected to present the layoff notice.
Many times, if you have a record of filing your taxes on time, the IRS may approve a penalty abatement without you presenting a reason. Ask a tax professional about qualifying for this. You can not do this more than one time in a period of several years.
Penalty abatement is often one part of a multi-pronged solution to a tax problem. Contact Kansas City Tax Mediation today to discuss your tax problems in a free, face to face consultation. Kansas City Tax Mediation: Let’s get through this together.