If you file your tax return and pay your taxes on time, or if the IRS owes you a refund, you may never have to worry about IRS penalties. But if you file or pay late, or if you commit some other serious infraction, you could be on the hook for a penalty.
If you’re in that boat, it’s not the end of the world. There are steps you can take to reduce the impact. If you can’t pay your balance in full, pay what you can now. You can apply for an installment agreement to pay the remaining balance, and that may reduce future failure-to-pay penalties.
If you’re proactive, you can minimize interest on penalties when you owe the IRS taxes. Here are a few types of penalty abatement options:
- Reasonable cause. If you have a legitimate reason for not being able to file or pay your taxes on time, you can request relief. You’ll need to provide evidence of your inability to file or pay on time, such as hospital or court records, proof of casualty loss or other relevant documentation. Some causes the IRS considers reasonable include:
- – Fire, casualty, natural disasters or similar hazards.
- – Inability to obtain relevant tax records.
- – Death, serious illness or incapacitation.
- Administrative relief. If you acted on incorrect IRS advice, you may be able to catch a break and get some relief. You will have to back up your claim, however.
- IRS error. The IRS made an arithmetic error or an IRS employee made a mistake or caused a delay. Again, you’ll have to document the error or mistake.
Figure out why you owe the tax. There’s always a chance it can be reduced or removed. If you owe less tax, you owe less interest too. The best way to stop interest from building up is to pay the full tax bill or make some other arrangement with the IRS as soon as possible.
If you need more time to file your return, make sure to apply for a six-month extension and pay your estimated amount owed by the due date. In cases of a natural disaster, the IRS may extend certain tax deadlines.
Do you want some help with organization so you’re paying what you need to pay on time? We can help.
Contact us at 703-218-3600 or click here. To review our personal financial planning articles, click here. To learn more about MCB’s tax practice and our tax experts, click here.
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