IRS Penalty Abatement
The way the IRS assesses penalties is sometimes complicated, but the most common ones taxpayers are hit with involve failing to file a return, or failing to pay all taxes owed once a return is filed. If you miss a tax deadline—or don’t file at all in one or more tax years—the penalties will begin to add up,
The IRS charges a range of flat and percentage-based penalties that are based on the tax code for the filing year. So that means the penalty you pay one year for a late return may be less than what you pay under a different tax code in a different tax year. What’s most important to remember however, is that penalties and interest will continue to compound each month that you are late filing or delinquent in paying. This can result in your tax debt ballooning well beyond the original amount you owed.
Penalty abatement allows the IRS to remove or lessen your tax penalty under certain conditions. Abatements may be approved due to a statutory exception, an administrative waiver, a correction -in – service error, or another form of reasonable cause. The following circumstances could potentially qualify for abatement consideration.
- A catastrophic event destroys required records or prevents you from mailing the return on time (fire, severe weather, flooding, natural disaster, etc.)
- You have a severe illness or a significant family emergency at the time the return is due
- Your return was submitted on time but improperly handled, routed, or date-stamped by the IRS
- Your envelope was postmarked on time, but inadequate postage or a wrong address delayed delivery
Abatement requests can be submitted using IRS Form 843, and many taxpayers do find success, especially if they can documentat of the circumstances on which their request is based.
The J. Gannon Helstowski Law Firm can help you apply for a penalty abatement from the IRS.
Frequently Asked Tax Resolution Questions (FAQ’s)
When the IRS issues a tax lien, it makes a formal claim to your property but allows you to keep it while the matter is under consideration and you make payment arrangements.
A tax levy is more serious, and yes – the government can and will seize your assets to satisfy tax debt if you are not actively working with them to resolve the issue. Finding a payment agreement you can afford is much better than letting the situation go until a prized asset is seized. Once the IRS issues a tax levy against your home, business, or other assets, finding a means for settling the tax bill is essentially the only way to get your money and property released.
Depending on the size of your tax debt, the IRS can claim both current assets and those you will earn or acquire in the future.
If the IRS has already taken action against one or more of your accounts, it’s important to understand that the levies will not be removed until you begin working with the IRS to resolve your tax debt. Enrolling in an installment plan agreement or simply paying the taxes owed is the quickest way to get the levy on your account released. You may also provide proof of financial hardship if you cannot currently pay anything towards your tax debt.
Because banks are required to hold levied funds for 21 days before turning them over to the IRS, acting quickly to get some form of tax resolution plan in place will help your bank speed the process of getting your funds returned to you. Our tax experts are skilled in negotiating the kind of tax resolution plan designed to satisfy IRS requirements and put your money back where it belongs – under your control.
Setting up an installment agreement is probably the simplest way to manage your tax debt and get it paid off. The IRS offers several different types of agreements to fit taxpayer needs, and payments can run up to 10 years. Taxpayers who owe less than $25,000 may qualify for a streamlined installment agreement, in which you pay down the debt over a five-year period. If you owe less than $50,000, the Fresh Start Initiative allows you to extend payments to six years. Partial and full-payment plans are also available to taxpayers who do not qualify for other programs and are based on a financial statement and information submitted by the taxpayer.
The amount of time needed to get your tax issue resolved depends on several factors, including the amount of delinquency, penalties, and tax debt you have and whether you have defaulted on a previous installment plan agreement. However, we will begin working to remove financial restrictions imposed by the IRS immediately by dealing with the most time-consuming aspects of tax resolution on your behalf. If we are able to help you secure or reinstate an installment agreement to address your tax debt, chances are good you could see the lien or garnishment order withdrawn quickly, or removed in 30 days or less.
The IRS can legally collect any back taxes you owe from your bank accounts, assets and other parts of your estate if you die. They will generally do so before the proceeds of an estate are distributed among surviving children, but the debt cannot be passed on to your children otherwise.
For every tax debt, there is a Collection Statute Expiration Date. The CDED determines the amount of time the IRS can continue to pursue payment for taxes owed in previous years. The statute states that the IRS cannot pursue collection on a tax debt for longer than 10 years from the original tax assessment date, which corresponds with the month, year, and date the return was filed.
The IRS can change this date, but only under certain conditions. If you file an appeal or make an offer-in-compromise, the deadline may be extended.
We have been very successful in getting IRS tax penalties waived or reduced for our clients, including penalties for failure to file, late filing, and underpayment of taxes due. If this is the first time you’re filing a late return, or if you were previously in good standing and have been on time with your returns for the last three years, the IRS may offer you a penalty abatement.
You may also appeal your penalties by petitioning for abatement due to reasonable cause, meaning unforeseen circumstances significant enough they prevented you from filing or paying your taxes on time. Some examples include a medical emergency, temporary disability, extreme financial hardship, or natural disaster. Tax fraud carried out in your name by a CPA or tax preparation service may also be eligible grounds for an appeal.
Even if you don’t qualify for these specific types of waivers, our tax abatement experts will work with you to get your penalties reduced or eliminated. We want to ensure that you do not see your tax debt rise each month due to compounding interest and penalties on overdue tax payments.
If your financial situation has changed since your last tax return, or you can’t get on an installment plan because the amount the IRS requests is too high, there are a few other options. You can submit an up-to-date financial statement demonstrating any current hardship and detailing wages earned and expected from work or other income for the year ahead. If you can demonstrate that your income is insufficient for the IRS to collect all of what you owe within the time period they have to collect, you may be able to get penalties and interest reduced, or part of your tax debt canceled.
How many notices will the IRS send before my bank account is levied or a lien is put on my property?
There is no set number of notices that applies to every taxpayer’s situation, but it’s never a good idea to ignore correspondence from the IRS. If you’ve received two or more notices about delinquent tax returns or seeking payment of taxes owed – or have gotten even one certified letter from the IRS about your situation – you may be closer to a tax lien, tax levy, or wage garnishment situation than you realize. Immediate action may be required to prevent bank account or asset seizure.
Absolutely. Your Social Security payments can be garnished just like your wages can. It’s even easier actually, because there’s no middleman — the government will just takes their portion right off the top before sending you what’s left in your social security check.
If you owe back taxes and do not cooperate with IRS attempts to collect, wage garnishment is an effective tool that forces you to pay up. Each time you fail to respond to a letter requesting payment, you’re taking another step towards wage garnishment. And once the IRS issues a wage garnishment order to your employer, he or she will have no choice but to comply.
Self-employed taxpayers are not immune to wage garnishment either. The IRS will simply issue the order to the businesses that pay you contract or freelance wages.
Yes, we offer a free consultation. Keep in mind a consultation is the assess your current situation and agree upon a fee arrangement. We may not be able to give you a legal opinion until more research is done given your situation. Sometimes it may be necessary to charge a research fee or analysis fee to give you a complete plan of action and legal opinion. We strive to keep this fee as reasonable as possible.
We provide the initial consultation free of charge, so we can learn about any tax issues you may have and design a tax resolution plan to meet your needs. We offer many services for a flat fee, and also give you the option of paying over time. We’ll do our best to work with you regardless of your financial situation.