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Tips to Get Penalty Relief From the IRS

It is pretty common for a taxpayer to receive a letter in the mail from the IRS stating they are being charged penalties/interest if they underpaid their taxes during any given year. This may occur because the taxpayer may not have had enough taxes withheld from their weekly paychecks or if the person is self-employed, estimated taxes may not have been paid during the year. For example if you owe $10,000 when you file your tax return, the IRS will send you a follow up letter charging you additional penalties/interest on top of the $10,000 because you didn’t pay what was due during the year. Penalties arise from instances such as failing to file a return or failing to pay your taxes due on time. The IRS does offer possible penalty relief for certain circumstances.

• Reasonable Cause – If the taxpayer can show they tried to meet their obligations but could not do so for a legitimate reason, such as a natural disaster or a death in the immediate family, the IRS may consider penalty relief.

• Administrative Waiver and First Time Penalty Abatement – To qualify for this you didn’t previously have to file a return or had penalties for the three tax years prior to the tax year in which the IRS assessed a penalty, filed all returns/extensions on time, or paid/arranged to pay any tax due.

• Statutory Exception – Taxpayers who received incorrect written advice from the IRS may qualify for this type of relief.

The IRS does offer a “Penalty Appeal -Online Self-Help Tool” if you’re your request for penalty relief was denied. This can be found at the following link:

https://www.irs.gov/compliance/appeals/penalty-appeal-online-self-help-tool-start

Please consult your tax advisor on all the above information.

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