4 Simple Steps on How to Deal With Penalties From Tax Non-Payment

If you didn’t file or pay your taxes on time, the debt doesn’t go away. It may even grow, as it accumulates penalties and interests each month they remain unpaid. The IRS will try to attempt to collect the tax you owe. But then, if you have reasons for non-payment and can prove it, you may be able to request a waiver or reduction of the IRS tax penalties. Unbelievably, the IRS isn’t entirely heartless, and for a government agency, they can help you once in a while. 

You can check whether your circumstances are eligible for abatement. The IRS may consider waiving your penalties if the reasons you give for not paying on time are due to circumstances out of your control. They could be issues like a death in the family, imprisonment, illness, a hurricane, or the destruction of your records either by fire, water, etc.  

However, if the reason you give for not paying is that you lacked the funds to pay your taxes, the IRS won’t waive the penalties because they hold you responsible for setting cash aside for clearing your taxes. However, they may consider waiving the penalties for lack of sufficient funds if you’re unemployed. 

Ensure that you find poof of your claims and present them to the IRS. If you reside in a federally-declared disaster and the IRS is offering residents penalty waivers, then ensure you gather proof of your residency in that area. If your reasons for non-payment are because you spent time in the hospital, your medical reports or bills are your proof. Without any proof, the IRS is unlikely to waive or reduce your penalties. 

Write a letter to the IRS and request a penalty waiver. Ensure that you state your reasons for non-payment and provide copies (never the originals) of the documents you wish to provide as proof. You should send the letter to the same IRS address, which sent you your notification for the penalty charges. You can also call and talk with an IRS representative over the phone. 

The IRS will respond to your request after 60 days. If you’re unsatisfied with the response, you can appeal by writing back with more information, requesting them to reconsider. If the second letter doesn’t resolve the issue, you can appeal the IRS decision to impose penalties. This will allow you to meet with an impartial appeals officer who will reconsider all your evidence, facts, and circumstances. 

If you operate a small business and the employee who usually files your taxes quits when the deadline for filing is due, then you can use this as a valid reason to get a penalty waiver. In some cases, relying on some accountant’s wrong advice is a sufficient reason for the IRS to waive your penalties.  

Taxfyle is powered by professionals who will help you sort all your tax returns accurately to avoid attracting any interests and penalties.