First of all, you should know that it is possible to negotiate a reduction in penalties and interest, but it is at the discretion of the IRS agent you are working with. Second, it takes time, sometimes a year or two, to negotiate with the IRS for a reduction in interest or penalties. The FTA is the easiest option of all penalty relief options. You can request it by calling the toll-free number listed on your IRS notification, or your tax advisor can call the specialized tax hotline or compliance unit (if applicable) to request the FTA for any amount of penalty.
In some cases, tax penalties can be negotiated, reduced, or even eliminated entirely. There are several IRS programs that can be used when you have significant tax penalties and want some type of relief. Sometimes, the IRS will allow you to pay much less than you actually owe in taxes through an option called Compromise Offer (OIC). To qualify, you must convince the IRS that you can't pay what you owe.
You can make this reduced payment using short-term installments or a lump sum. Check if your circumstances could entitle you to a reduction. The IRS may consider waiving fines if your reasons for not paying on time are due to circumstances beyond your control, such as a death in the family, illness, incarceration, a hurricane, or the destruction of your records. However, if the only reason you don't pay is because you don't have enough funds, the IRS won't exempt you from fines because it makes you responsible for setting aside money for taxes.
However, they may consider waiving sanctions if you have been unemployed. The estimated tax penalty is another common penalty that taxpayers often challenge when making an exception when filing their tax return. Understand the most common types of commercial IRS tax penalties for filing and paying late, and what are the possible options for requesting relief from IRS fines. The IRS will continue to try to collect the taxes you owe, but may be willing to exempt or reduce penalties if you show that you have a good reason.
If you missed the deadline for filing or paying taxes due to circumstances beyond your control, you may be entitled to a relief from the fine for a reasonable cause. The FTA can be used to reduce fines for lack of presentation, non-payment and non-deposit during a tax period if you have a clean compliance record for the past three years. You can use the first-time penalty reduction (FTA) if you haven't received any tax penalty in the three years preceding the year in question.
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