As long as this was your only penalty in the last three years, you should still qualify for first-time abatement. Generally, the IRS will only remove penalties from a single tax return from a single filing period. For instance, if you have years of delinquent returns, you will typically not be able to get the penalties waived from all of the returns. However, if you only have penalties on a single return, you should be able to get them removed as long as you meet the requirements.

The first time penalty abatement policy is in place for taxpayers who experienced an unprecedented disruption in their tax situation which brought unpredictable tax debts to the fore. Aside from seeking relief through an IRS debt forgiveness program, taxpayers can lower their tax bill when filing their tax returns, such as through tax-deductions and tax-credits. Additionally, making tax-advantaged investments, such as tax-deferred, tax-sheltered, or tax-exempt retirement accounts can offer tax benefits. In short, in the standard case of taxes owed, you will have to pay taxes through a credit or debit card, even if you get debt forgiveness.

Request for temporary delay of the collection process

This is another reason why it’s best to make sure every interaction you have with the IRS happens in writing whenever possible. The statutory exception allows you to avoid penalties caused by the IRS. If the IRS sent you written advice or instructions that turn out to be incorrect, you can ask that any resulting penalties be waived. This https://simple-accounting.org/accounting-for-startups-the-ultimate-guide/ being the case, it is always best to retain records from government agencies and healthcare institutions alongside your personal financial records. To increase your chances of approval, you should work with a professional who understands this program. To apply for an IRS Installment Agreement, you’ll need to complete IRS Form 433-D.

Keep in mind that levies never come without notice, and if you receive a letter, you should reach out to one of our tax pros immediately. To get help with IRS tax penalties, find a local tax professional to help you. Using TaxCure, you can search for local tax attorneys, CPAs, and enrolled agents. You can also narrow down your search based on their experience with tax penalties or other issues as required. This post contains detailed instructions about applying for first-time abatement or you can simply file Form 843.

Other Debt-Relief Help

The IRS doesn’t publish numbers on how much people save with offers in compromise or other tax settlements. Some tax attorneys estimate that people save up to 80% of their tax bill on average, but there is limited data to back up this estimate. Note, QuickBooks vs Quicken: Knowing the Difference however, that the IRS rejects the majority of offer-in-compromise applications. To apply for these programs, you must submit a paper application to the IRS. There are more details on how to apply for these programs if you follow the links above.

• If you owe money and haven’t reached a payment agreement, the IRS can move to garnish your wages.
• Nonetheless, some tax lawyers or advisors will try to use the statute of limitation to resolve a tax case.
• Less-than-ideal consequences may include lowered credit scores, which can impact your ability to get loans on things like cars or homes in the future.
• These options fall under the umbrella of the IRS Fresh Start Program.
• If you receive a penalty notice of failure to deposit or notice for immediate payment, the penalty can increase to 15% of your unpaid amount.

If you are accepted, this program can be used to decrease the total tax debt balance you owe. Through this initiative, the IRS will review your income and expenses and re-evaluate your debt accordingly. If the IRS deems that you can’t afford your debt in your current financial situation, they can propose a reduced total debt amount for you to repay.