If you fail to file or pay your taxes on time the Internal Revenue Service (IRS) will undoubtedly slap you with tax penalties and interest. These penalties can accumulate quickly and if you don’t address the problem promptly you may find yourself facing a tax debt that you are unable to pay. However, there are certain circumstances under which taxpayers can request relief from IRS penalties.This article briefly explains how to request relief from IRS penalties, however, it is always a good idea to consult with an experienced tax penalty relief attorney to ensure that your request is appropriately conveyed to the IRS.
Types Of Penalty Relief Offered By The IRS
A taxpayer may generally qualify for relief from penalties if they sincerely tried to comply with the tax laws but were unable to do so due to circumstances beyond their control. They may also be granted relief if this is their first penalty and the tax situation has already been rectified. The IRS divides the qualifying circumstances into three main categories: reasonable cause, first time penalty abatement, and statutory exceptions.
If a taxpayer is able to show that they exercised ordinary business care and prudence to meet their tax obligation, but were ultimately unable to do so, then they may qualify for relief from their IRS penalties by showing reasonable cause. It is important to note that a lack of funds in and of itself does not qualify as reasonable cause. However, some causes that the IRS does often consider to be reasonable include:
- – Illness,
- – The death or illness of a close family member,
- – Bad financial advice,
- – Natural disasters such as fires, floods, tornadoes, or
- – Circumstances beyond the taxpayer’s control such as civil disturbances or theft.
In order to demonstrate reasonable cause to the IRS a taxpayer must explain what happened, how the circumstances affected their ability to file or pay their taxes, and what actions they took in an attempt to pay. It is also a good idea to submit documentation supporting your story, for example hospital records, court records, or documentation of a natural disaster.
First Time Penalty Abatement
The IRS may also grant relief from a tax penalty if the taxpayer qualifies under the First Time Penalty Abatement policy. Taxpayers will likely qualify under this policy if they:
- – Have not received any tax penalties for the previous three tax years,
- – Filed all returns that are currently due (or have filed for an extension), and
- – Paid, or have arranged to pay, any tax due.
The IRS also offers relief when an applicable statutory exception can be found in the Internal Revenue Code (IRC). For example, there is a statutory exception that applies if the taxpayer received incorrect written advice from the IRS. Additionally, if you received incorrect oral advice from the IRS you may be eligible for administrative relief.
How Can We Help?
If you are facing IRS penalties and would like to request relief, contact the experienced Chicago tax penalty relief attorneys at the Bentz Holguin Law Firm, LLC. Our lawyers will negotiate with the IRS and work with all parties involved on your behalf in order to arrange the best possible resolution to your tax debt situation. Contact our office by calling (312) 881-5112 to schedule a free consultation.