Every year, the IRS charges debtors a ton of penalties. When you can’t pay your taxes, the last thing you want to see is more taxes. Fortunately, the IRS does provide
several options for penalty relief.
If you are eligible, the IRS has a simple administrative procedure that can relieve penalties for:
- Failure to file a tax return
- Failure to pay taxes by the time they were due
- Failure to deposit payroll taxes in a timely manner
In order to receive a penalty waiver under this program, you can’t have any unfiled returns. In addition, you need to deal with any unpaid tax debt. You will either need to pay off the tax liability or enter into a payment plan. If you’re in a tough spot and can’t afford to make monthly payments, the IRS can put you into a noncollectible status. This approach makes you ineligible for the removal of penalties.
The administrative penalty waiver is something you can get every few years. The IRS insists that you have a clean record with them for at least the three years prior to the year that you’re requesting penalty relief for. Due to this three-year rule, when you owe taxes for multiple years and have several years of penalties, you’re only allowed penalty relief for the first year in the sequence.
If you have a reasonable excuse for why you didn’t file a return or pay your taxes, the IRS will consider it. They have specific rules for how they evaluate those kinds of requests, and decisions are made on a case-by-case basis. The IRS also desires proof that you made reasonable efforts to comply with the tax laws but weren’t able to because of circumstances beyond your control.
Lastly there is the proverbial “pennies on the dollar” settlement you hear about on the radio. It does exist, but there are very strict eligibility criteria for it. If you’re eligible, all of the penalties and interest the IRS has charged you magically disappear. If you are in such dire straits financially that you qualify for this program, then your entire tax debt is erased, penalties and all.
If you owe back taxes to the IRS, you undoubtedly have penalties, too. Let’s schedule a time to talk about your options.
We're in your corner!