Abatement of Penalties
Abatement of penalties is a great way to not only reduce penalties, but also eliminate interest accumulated on the penalty. Accrued interest is not negotiable when reducing taxes and penalties. Yet when you reduce your taxes or penalties, the interest is recomputed. This can lead to lower interest you will be required to pay.
Noncompliance
When you choose noncompliance or not to comply with the IRS, you quickly learn that it will become very costly. For a little history, prior to 1955 the Internal Revenue Code (IRC) consisted of approximately 14 penalties. Today, the current internal revenue code contains ten times as many penalties. Penalties for various types of tax violations. The IRS is encouraging you ten times moreover why you should voluntarily file and pay your taxes. None of the penalty categories are friendly. There are two categories penalties fall within: Civil or Criminal.
Civil Penalties
The most common civil penalty is the failure to file and failure to pay. Penalties were assessed to millions of taxpayers last year. Failure to timely request to extend your filing date will result in an assessed penalty. Form 4868 for individuals will stop this penalty for being assessed to you. If you are granted the extension to file your return later, it does not extend the time to pay your taxes.
Payment
Payment is due by the end of the tax filing season. That date is April 15, 2019 for this tax year. Failure to pay your taxes timely will result in additional penalties. Interest will accrue on these penalties as well as on the actual taxes due. Unless your reason qualifies, relief from such penalties will be denied. The penalties and interest can accumulate faster than the actual taxes owed. Don’t ignore this fact. Just like your lawn, ignored long enough, you can have more weeds than actual grass growing.
Comply
The IRS believes imposing these penalties encourages taxpayers to voluntarily comply to the rules. How encouraging can that be? I say file the tax return regardless whether or not you are in the position to pay the tax in full. You will avoid the failure to file penalty. There are other methods of paying the tax systematically without draining your resources. Also, complying keeps the IRS from aggressive coming after your assets.
Penalty Abatement
Taxpayers should know that there is a recourse to eliminate penalties and at the same time, reduce interest. The IRS will consider removing penalties under certain “Reasonable Cause”. Reasonable cause is based on all the facts and circumstances in each situation. This allows the IRS to provide relief from penalties. Reasonable cause relief is not available for all penalties, however other exceptions may apply. Penalties where reasonable cause is considered, the taxpayer must establish that he/she exercised ordinary business care and prudence. Why they were unable to comply. Reasonable cause can be time sensitive when being considered. Wording used to describe the reasonable cause provision varies. Be ready to provide required evidence that you acted in good faith to comply with the law.
It will take a skilled and experienced Tax Pro to present to the IRS an effective and acceptable reasonable cause position statement. Contact me today and lets abate these penalties and reduce the mounting interest.
