The Internal Revenue Service (IRS) is a U.S. government agency responsible for the collection of taxes and enforcement of tax laws. The agency operates under the authority of the United States Department of Treasury whose primary purpose is collection of delinquent taxes from individual taxpayers and business entities. So, what are the most common tax penalties & how can you avoid paying them? Here in this blog let us see some ideas based on it.
Did you know that the failure-to-file penalty is usually five percent of the tax owed for each month, or part of a month that your return is late, up to a maximum of 25%? If your return is over 60 days late, there's also a minimum penalty for late filing; it's the lesser of $210 or 100 percent of the tax owed. The IRS penalty for late payment of tax is also added to individual taxpayers filing tax returns after the due date. Additional penalty for not pre-paying of tax is added to business entities. There are also added penalties for not filing specific tax forms based on the choice of your business entity.
Basically, if you let an entire filing year go by without paying the IRS what you owe, it’s considered “back taxes.” It’s important to note that even the taxes you don’t pay within a particular tax year already incur penalties and interest. In fact, penalties and interest are applied even if you file an extension. If you don’t pay the IRS on time, they don’t wait to act. However, there are ways to lessen this burden thousands of United States citizens face very year. Depending on your situation, an offer in compromise (OIC) or penalty abatement could help to substantially reduce your tax balance.
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer's tax liabilities for less than the full amount owed.
Any involvement of the IRS puts in play a range of possibilities. The IRS will either reduce, or remove penalties, if you’re eligible for a penalty abatement. Instead of trying to avoid the IRS, if you had a good reason why you didn’t pay or file what you owed when you filed, then you can apply for penalty abatement with the help of IRS tax attorney in Seattle. There is also the First Time Penalty Abatement option available to taxpayers who have never requested a tax penalty abatement before. While the IRS is considering your request, you won’t be required to pay until your situation improves. Nevertheless, an interest would continue accumulate on your tax balance. This doesn’t reduce the back taxes you owe, but it minimizes the penalties applied to that debt.
These are important rules and regulations to understand because the agency has the power to bring civil penalties, and its investigation could lead to federal criminal charges. Consider hiring an experienced tax attorney in Seattle, WA. Call Guzhva Law Firm, PLLC at (425) 785-1212 for a free phone evaluation!