Principles and Conditions to Request IRS Waiver for Tax Penalties and Interest
Despite IRS having a draconian reputation in most circles, it is still a government agency that is ultimately in the service of civilians. They have methods to deal with belligerent individuals or organizations who persist in tax evasion, which gives them a scary repute. However, they do take into account those who have genuine reasons for not paying their taxes. They can cooperate with those individuals or organizations to a degree by waiving a percentage of the amount owed, or by extending the deadlines. Waiving penalties and interests, IRS is perfectly capable of it, if you have a right reason to not file or pay your taxes. You, as an individual, or on behalf of an organization, are perfectly entitled to request the IRS for this waiver or leniency from tax penalties.
If IRS allows it, you can receive a relief from paying penalties for following infarctions;
I) If you fail to file tax return
II) If you miss a deadline for paying taxes
III) If you fail to deposit certain taxes, as required by the law
Types of Relief from IRS Tax Penalty
IRS provides three main types of tax relief depending upon the penalty for not paying taxes on time which was imposed upon you.
If the individual hoping to get a relief from tax related penalties has a reasonable explanation for their failure to pay the taxes may get a break from the IRS. The term ‘reasonable’ is the key here. You must remember, if the subsequent investigation by IRS results in proving your claim to be wrong or flimsy, then the penalties will increase, instead of going down. You must be capable of establishing the facts for your cause and prove it in beyond a reasonable shadow of doubt. A documented proof goes a long way in proving such a claim.
I) Fire, or a natural disaster will count as a reasonable excuse. Casualties or other serious occurrences will be reasonable too. Previous waivers have been signed for phenomenon such as extreme weather and forest fires. If your home or business is in the middle of a riot zone, you may receive a waiver based upon a police report.
II) IRS may be willing to sign off a waiver even in the absence of proper records in a disaster zone.
III) Death, mortal injury, mortal illness of yourself or an immediate family member counts as a reasonable excuse.
IV) Lack of funds does not constitute as a reasonable excuse, unless the reason for the lack of funds meets reasonable criteria.
First Time Penalty Waiver:
In case you are first time offender for missed filing or paying your due taxes, the IRS tax penalties and interests can easily be waived off giving you the privilege of receiving “first-time penalty abatement”.
The first-time penalty is applicable when;
The first-time penalty is applicable when;
I) You were not required to file a tax return. Or you have no penalties for three tax years straight before the tax year in which you actually received the penalty. Having a previously clean record helps out a lot as passive evidence of your honesty and applicability for leniency.
II) You filed all of the currently required forms or filed an extension of time to file. Leniency is shown when you show your diligence and willingness to do things the right way.
III) You have already paid, or at least arranged to pay any due tax. It shows you are making use of all means under your control and not shirking your obligations.
Note: Administrative relief may also apply if the advice that the individual received from IRS was wrong. In that case IRS accepts full responsibility for their own inadvertent error and does not hold the individual responsible.
A statutory exception can be if you received incorrect written advice from the IRS. In such a situation, the IRS would be bound by their own rules and the law to accept your claim and give you relief for the inconvenience faced by you. However, you must present the correct and relevant documentation to support your case. The relevant documents must include;
I) Your written request for initial advice from IRS.
II) The faulty advice you received and relied upon that was furnished by the IRS.
III) The report of tax adjustments identifying the penalty or the addition to your taxes and other relevant items relating to the use of faulty advice.
In every such case, it is pertinent that you gather and present the proper documentation which clearly shows the reason you should receive a penalty abatement. It must highlight that error does not lie with you, but with the IRS.
Note: The IRS does not deliver relief from interest charged in special cases of reasonable cause. It also does not provide relief for the first-time penalty relief. You must remember that to charge late payment interest is sanctioned by the law so you will continue to accrue interest, at least until you have paid your account in full.
However, if any penalties are reduced by relief or waivers, the relative IRS interest rate is automatically reduced.