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IRS Penalties: Understanding Your Rights
IRS tax penalties and interest charges can cause emotional distress and financial hardship. But make sure that before you attempt to tackle the issue, you understand exactly why these penalties were imposed and what your legal options are to get them removed or settled.
Late filing penalties are one of the penalties that cause taxpayers a great deal of concern. They amount to 5% of the unpaid tax balance for each month or part of a month. The maximum late filing penalty is 25% of the assessed tax.
Failure to pay penalties are 0.5% of the initial tax bill. These penalties are also capped at 25%. Should you ever find yourself in a situation where you cannot afford to pay your tax bill at least you need to file your return.
Taxpayers are often amazed (and of course disappointed) when they file their returns 6 months or so late and find out that their penalties and interest amount to 30-40% of the initial tax bill! This is what can put taxpayers into a financial mess that is hard to get out of.
The IRS will remove (or abate) penalties under certain circumstances. The taxpayer must show reasonable cause. Reasonable cause normally is the case under the following situations: (1) a serious illness or even death of the taxpayer or his or her immediate family; (2) the taxpayer was unavoidably absent on the filing date; or (3) the physical destruction of the taxpayers residence or business.
The IRS can abate interest charges only in certain situations. These include situations in which there was an unreasonable error or delay by IRS employees or if the late payment occurred in an area that was a presidentially declared disaster area.
If you are losing sleep over IRS penalties and interest charges, you need to realize that you have options. But first realize that the problem will not go away on its own. You must address it quickly in order to be successful.
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