Penalty and Interest Abatement

Penalty and Interest Abatement

Every year individuals and businesses must pay taxes (unless they make so little that none are due). Also, with certain limited exceptions, individuals and businesses must file a tax return. Failure to do either of these when required will result in penalties.

If you file a tax return for a given year but don’t pay all the taxes you owe, the IRS will assess a fine called the Failure to Pay. Pursuant to this, the IRS will charge you ½ of 1% of the unpaid taxes per month. This fine cannot exceed 25% of the unpaid taxes.

If you were required to file a return for a given year and failed to do so, the IRS will assess a fine called the Failure to File. Pursuant to this, the IRS will charge you 5% per month of the amount of taxes you would have owed if you would have filed the tax return on time. This fine cannot exceed 25% of the unpaid taxes.

The Failure to Pay Fine and Failure to File Fine are the two most common types of IRS tax fines. Fortunately, there are methods to reduce or completely eliminate the fines.

If you don’t pay your taxes on time, not only will you face the fines above, but you will be charged interest on the amount that was not paid. The IRS charges it not just for the amounts you failed to pay, but also on the penalties themselves. For instance, if you fail to file a return and incur a $1000 Failure to File Fine, you will owe interest at the applicable rate on the $1000. It is not charged on the Failure to Pay Fine. Getting it reduced is more complicated than getting penalties reduced, but in some cases, it can be reduced, depending on the circumstances. Unfortunately, there is no limit to the amount the IRS can charge you.

There are two primary methods a Dallas Lawyer can use to help reduce your interest and penalties. First, if certain conditions are met, all fines for a specific year can be completely eliminated. And if these fines had interest added to them, the interest will go away with the fine. For example, if you incurred a Failure to File Fine in the amount of $1,000, and interest on the penalty is $500, abating the $1,000 penalty will also completely abate the charge.

Penalties for all other years, and regardless of specific conditions or the number of years owed, can be reduced if you can show reasonable cause for having incurred the fine. For example, if you failed to file a return because of an ongoing illness, the IRS may agree to reduce or eliminate the fine.

Making the case for a fine and interest reduction requires knowledge of how the IRS works and the specific conditions that must be met. Call us to find out if you qualify for Abatement.