Ababtement of Tax Penalties

Failure to pay your tax liability can result in the assessment of penalties and interest that compound over time, causing your tax debt to grow substantially. Extended neglect or failure to pay this amount can bring about enforced collection actions, such as federal tax liens against your property, levies on your financial assets and sources of income, and seizures and sales of your real and personal property. Tax Muscle can help you reach a favorable tax settlement.

The IRS assesses penalties for both filing your tax return late and paying your taxes late. If you owe tax and do not file on time, the total late filing penalty is usually five percent of the tax owed for each month, or portion thereof, that the return is late, up to a maximum of five months (or 25 percent). If your return is over 60 days late, the minimum penalty for filing late is the smaller of $135 or 100 percent of the tax owed.

If you file a return but do not pay all amounts shown as due on time, you will generally have to pay a late payment penalty of one-half of one percent of the tax owed for each month, or portion thereof, that the tax remains unpaid from the due date, until the tax is paid in full or the 25 percent maximum penalty is reached.

Under certain conditions, you may qualify to have your IRS penalties fully or partially abated for either one or multiple tax years. In order for the IRS to accept this abatement request, you must show reasonable cause specific to each tax year for which you are requesting abatement and the noncompliance must not be due to willful neglect.

The IRS will consider any of the following reasonable cause for abatement of IRS penalties:

• Death, Serious Illness, or Unavoidable Absence - Death, serious illness, or unavoidable absence of the taxpayer, or a death or serious illness in the taxpayer's immediate family may establish reasonable cause for filing, paying, or depositing taxes late. For a corporation, estate, trust, etc., the death, serious illness, or other unavoidable absence of the taxpayer, or a death or serious illness in the immediate family of the taxpayer, must specifically involve the taxpayer who had sole authority to execute the return, make the deposit, or pay the tax.
• Fire, Casualty, Natural Disaster, or Other Disturbance - Taxpayers affected by fire, casualty, natural disaster, or other disturbance may qualify for penalty abatement. Penalty relief may be appropriate if the taxpayer exercised ordinary business care and prudence, but due to circumstances beyond their control, they were unable to comply with the law.
• Unable to Obtain Records - Penalty relief is accorded to taxpayers who are unable to obtain their records. Explanations relating to the inability to obtain the necessary records may constitute reasonable cause in some instances, but may not in others.
• Mistake was Made - Generally, claiming that a mistake was made does not satisfy the ordinary business care and prudence standard and does not provide a basis for reasonable cause. However, the reason for the mistake may be a supporting factor if additional facts and circumstances support the determination that the taxpayer exercised ordinary business care and prudence but nevertheless was unable to comply within the prescribed time.
• Erroneous Advice or Reliance - Claiming detrimental reliance on another party to comply on your behalf or that another party provided erroneous advice is generally not a basis for reasonable cause. This is particularly true for filing or paying obligations, since the taxpayer is responsible for meeting their tax obligations and that responsibility cannot be delegated. But if the taxpayer can show that their noncompliance was due to either not having access to their own records or a change in the tax law that they could not be reasonably expected to know, then their claim of erroneous advice or reliance may be accepted.
• Ignorance of the Law - In some instances, taxpayers may be relieved of their penalties due to their unawareness of specific obligations to file or pay taxes. The taxpayer may have reasonable cause for noncompliance due to ignorance of the law if: 1) A reasonable and good faith effort was made to comply with the law, or 2) The taxpayer was unaware of a requirement and could not reasonably be expected to know of the requirement.

If your noncompliance can be explained by any one of the previous conditions, then our advisors may be able to end the perpetual infliction of IRS penalties by negotiating an abatement of IRS penalties on your behalf.