If you are unable to pay taxes due to reasonable cause or undue financial hardship, the IRS may waive associated penalties and interest. The agency will also consider your payment history when deciding whether or not a waiver request should be granted.
In other words, if you have remained up-to-date in paying taxes previously and encountered an unexpected situation that prevents payments for this tax cycle, then the IRS is likely to grant your plea for waivers of penalty and interest charges.
Nonetheless, keep in mind that the IRS is not obligated to grant your request and decisions may take longer than expected. On top of this, they could potentially ask you for extra documents or information to accompany your waiver application.
To assist with preparing a successful waiver request, it's recommended that you consult an experienced tax professional who can help guide you through the process.
The Internal Revenue Service (IRS) interest rate is subject to change over time, and it comprises the federal short-term rate plus an additional 3%. This daily interest compounding arises from when you fail to pay taxes in full or on time.
Keep in mind that this rate may also increase depending on factors like inflation. Therefore, it's important that taxpayers keep up with any updates or changes to the IRS interest rate so they know exactly how much they owe at any given time.
There are several ways to request that the IRS waive penalties and/or interest associated with a tax liability. To give you a better idea of how to go about this, here are some of the most common methods:
First-time Penalty Abatement
The first is through the First-time Penalty Abatement or FTA program. This program waives certain taxpayers’ initial failure-to-pay and failures-to-file penalties provided the taxpayer has no prior IRS tax delinquency in the last three years.
The other option is citing Reasonable Cause for why taxpayers did not comply with filing their taxes on time and having them approved by an Internal Revenue Agent assigned to the case.
The third alternative for taxpayers is to cite a Statutory Exception, which applies when taxpayers can verify that their failure to pay or file was out of their control and due to circumstances such as natural disasters, illnesses, and military service.
However, in addition, they must prove that throughout this period they acted in good faith with all relevant taxation laws.
First-time penalty abatement is a program offered by the Internal Revenue Service (IRS) to waive certain penalties or interests accrued on delinquent taxes. To qualify for this program, taxpayers must meet these criteria:
To be eligible, all required returns must have been submitted or a valid extension requested, and you cannot currently be awaiting an IRS return request.
To remain compliant, all due taxes must be paid in full or an installment agreement with current payments will suffice.
Clean penalty history: You must have a clean history of taxes over the past three years (besides any potential estimated tax penalty).
It’s important to note that taxpayers should always consult with a qualified tax professional when dealing with IRS penalties and/or interests in order to determine their eligibility for First-time Penalty Abatement or any other program.
If you think that you are unfairly charged a tax penalty or interest, there are steps you can take to dispute it.
The first step is to contact the IRS and explain why you believe that the charge is unfair. You should provide as much detail as possible about your situation, including what led to the failure to comply with tax laws.
The next step is to make sure that you have the necessary documentation to back up your claims. This includes any evidence of hardship or extenuating circumstances, as well as receipts proving payment of taxes due and other applicable paperwork.
Once all of this is submitted, the IRS will review your case on an individual basis and make a decision. If the IRS denies your request, you can file an appeal with the Office of Appeals or seek professional help from a tax lawyer or accountant. With their assistance, you may be able to have the penalty or interest overturned in a timely fashion.
No matter what action is taken, it’s important to keep track of all correspondence with the IRS and other relevant entities.
It is important to remember that the IRS has established certain programs, such as First-time Penalty Abatement and Reasonable Cause, to provide taxpayers with options when dealing with tax penalties or interests. By following the steps outlined above, you can dispute any charges that are deemed unfair.
However, if you find yourself overwhelmed or confused, it is best to contact a qualified tax professional who can guide you.
Regardless of your situation, it’s important to remember that the IRS has many programs available to help taxpayers in need. Taking advantage of these options could save you time and money in the long run.