In 2020, the Internal Revenue Service (IRS) assessed more than $14 billion in civil penalties related to delinquent taxes. If you are struggling with back taxes and are seeking assistance with obtaining tax debt relief, there are numerous options to help you reduce or remove your IRS penalties, depending upon meeting certain qualifications.
IRS Penalties
There are more than 100 different types of penalties that can be assessed by the IRS. Depending on the severity of the penalty, monetary fines or the forfeiture of property may be involved. Here is an overview of some of the most common IRS tax penalties:
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Failure to File Penalty
This penalty is based on how late you file your tax return and how much you owe as of the original payment due date. For returns over 60 days late, the minimum penalty is $435 (for 2020 returns) or 100 percent of the tax owed on the return, whichever is less. Each month you do not file, you will typically be charged an additional 5 percent of the unpaid taxes. Though, this penalty maxes out after five months and is capped at 25 percent of your unpaid taxes.
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Failure to Pay Penalty
This penalty may be imposed for taxes you did not pay on your return, as well as those you didn’t report. The FTP penalty is 0.5 percent of the unpaid taxes for each month you do not pay. If you receive a Notice of Intent to Levy and do not pay, the penalty increases to 1% per month. The penalty is capped at 25 percent of your unpaid taxes.
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Accuracy-Related Penalty
The IRS may impose an Accuracy-Related penalty equal to 20 percent of any underpayment of taxes due to certain actions on your behalf. This may include negligence, disregard of rules (careless, reckless, or intentional), understatement of income tax, or valuation errors.
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Failure to Deposit Penalty
Employers who do not make employment tax deposits on time, in the correct amount, or in the right way could potentially be hit with a Failure to Deposit penalty. The penalty amount varies from 2 percent to 15 percent of your unpaid deposit.
Types of Penalty Relief
If you were assessed with a massive tax penalty, do not fret. It is possible to reduce or remove some tax penalties if you meet certain factors.Though, it is important to note that relief is never guaranteed. There are currently three types of penalty relief offered by the IRS:
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Reasonable Cause Relief
The IRS has the discretionary authority to waive a penalty if you are able to show reasonable cause why you were unable to meet your tax obligations. Examples of reasonable cause include death, serious illness, natural disasters, and the inability to obtain records. When requesting this type of penalty relief, you bear the burden of establishing the facts and producing sufficient evidence to support the viability of your claim.
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First-Time Penalty Abatement
You may qualify for First-Time Penalty Abatement, which is also known as an administrative waiver. To qualify, all of the following factors must be met:
- No previous tax return was required, or you haven’t been penalized within the last three tax years prior to the year you received the penalty.
b. All required tax returns are filed, or you have a filing extension.
c. You have paid, or made arrangements to pay, any outstanding tax debt. -
Statutory Exception
If you received incorrect written advice from the IRS, you may qualify for a statutory exception.
Looking for Assistance in Achieving Tax Debt Relief? Contact Anderson Bradshaw Today
If you are struggling with tax debt, the professional experts at Anderson Bradshaw Tax Consulting can help you through your unique tax situation. With over 30 years of experience in the industry, we have seen many different tax issues and have learned the best ways to handle each one accordingly. You can feel confident knowing your struggles and difficulties with the IRS can be resolved and corrected quickly and efficiently at Anderson Bradshaw. For further information or to schedule a consultation please contact Anderson Bradshaw Tax Professionals at 877.550.3911 or visit www.AndersonBradshawTax.com to learn more.
