How to get IRS Tax penalties abated for clients?
Penalties are used by IRS to make taxpayers follow tax rules and it uses quite often.However IRS also provides options to get penalties removed, or abated. Sometimes taxpayer does not even know about penalty abatement or simply ignore it. But as a tax practitioner, you need to act promptly and smartly if your client comes to you with the same issue. You may be able to save hundreds or thousands of dollars’ worth of fees and penalties. Let us know about some most common penalties and how to get them abated. -Failure-to-pay penalty—This is imposed when a taxpayer doesn’t pay taxes on time. It is the most common of all penalties. -Failure-to-file penalty—This is imposed when a taxpayer doesn’t file a return on time. First-time penalty abatement can be used for failure to pay and failure to file penalties and is quite an easy one for taxpayers who have not been assessed with any other penalties of a “significant amount” on the same type of tax return within the past three years and have been in compliance with all filing and payment requirements. Here are some tips for failure to file and failure to pay penalty abatement:
- If you timely contact the IRS, arrange installment agreement and file a request for abatement of penalties, you may be spared penalties for failure to file a tax return and late payment of taxes, which can amount to a lot of money. Generally, one can have up to 60 months to pay. In certain circumstances, one can have longer to pay or the agreement can be approved for an amount that is less than the amount of tax they owe. Your request for an installment agreement cannot be turned down if the tax you owe is not more than $10,000 with the following conditions: 1)During the past 5 years you have been in compliance with all payments, returns and have not had any installment agreement. 2)IRS is confirmed that you can not make the payment of the amount owed during a particular period and you have provided all the necessary information required by IRS. 3)You agree to pay the full amount you owe within 3 years and to comply with the tax laws while the agreement is in effect.
- You can attach a penalty non-assertion request before penalties are even assessed. Once the penalty has been assessed, a taxpayer can request penalty abatement. This can ensure that all forms are filled out correctly and that every qualification has been met.
- Tax practitioners should give reference of the appropriate section of the IRS Penalty Handbook. Those who specifically referred to a section of the penalty handbook are much more likely to have IRS penalties reduced/abated that too in a comparatively short period of time.
- If your client’s penalty abatement got denied by any chance you can consider the office of appeals. You may get a positive result as appeals officers are usually willing to negotiate and compromise as compared to IRS agents.
- Another common penalty is estimated tax penalty commonly known as underpayment tax penalty. It is imposed when Individual taxpayers don’t adequately withhold from their wages and/or pay estimated tax payments evenly throughout the year. It is quite difficult to be removed, but impossible. Here are some tips for the estimated tax penalty abatement:
- Many times IRS credits payment to the wrong period, which attracts estimated tax penalty. Getting it corrected on time will save your client from getting the penalty. You can call 866-860-4259 to address any payment issues. It is the IRS Practitioner Priority Service line.
- If your client’s income varies during the year you should consider using annualized income installment method. This can reduce or remove the penalty.
- You should follow the transcripts from IRS every year to know how payments are calculated and applied.