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IRS Late Filing Penalty: Three Things You Need To Know
Considering the recent financial downturn, many Americans are finding themselves in trouble with the IRS. Often these troubles relate to penalties and interest charges resulting from late tax filings, non-payments and other issues.
Failure to file penalties are one of the most severe penalties that the IRS has in its arsenal. Failure to file penalties are 5% per month (or part of month) up to a maximum of 25%. If you dont have the funds to pay your tax bill, make sure that you at least file your taxes and you can work out a payment arrangement with the IRS later. That way you can at least avoid failure to file penalties.
Failure to pay penalties are less onerous. They are 0.5% of the initial tax bill. Again, these are capped at 25%. These penalties are certainly less than failure to file penalties, but they still can add up over time.
The above penalties can dramatically increase your overall tax bill. I see time and time again taxpayers who thought that the penalties would be minimal and that it was not a big deal if they filed late. This is obviously a big mistake.
Late filing and late payment penalties can be abated if the taxpayer can show reasonable cause. An abatement request is normally done by submitting a written statement to the director of the service center where the return was filed. You must include all facts and circumstances that led to the penalties.
Interest charges can be abated, but it is very difficult to qualify. Situations that may qualify for an interest charge abatement would include an unreasonable delay or improper advice given by the IRS or a late payment in an area that was a presidentially declared disaster area. Submit an abatement request (in written form) to the director of the service center where the return was filed. They may request supporting documentation to support your claim.
If you are facing IRS penalties and interest rest assured that you are not alone. Depending on the situation, you may be able to have the abated. Just make sure that you understand all the rights that have been afforded to you under the law.
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