Interest Relief You can authorize someone to contact the IRS on your behalf, see if you qualify for help from a clinic for low-income taxpayers, if you can't resolve the penalty on your own, contact the Taxpayer Defense Service, an independent organization within the IRS. We may reduce or eliminate some penalties over the phone. Call the toll-free number in the upper right corner of your notice to seek compensation for a reasonable cause and to have supporting documentation. The best way to prevent interest from accruing is to pay the full tax bill.
But, if that's not possible, you have options. Did they apply late and pay late? The IRS may impose a combined penalty of 5% per month (½ percent per month less than the separate penalties for each). The combined penalty is based on the unpaid tax balance for each month your return is late. When you reach 25% within five months for filing a late return, the late filing penalty will be suspended.
The share of the combined penalty for non-payment remains at 1.5% per month until it reaches a total of 22½ percent. Therefore, the maximum combined penalty is 47½%. Keep in mind that tax penalties don't include interest charges, which never stop. If you believe you have a valid IRS interest reduction request, IRS Form 843 is the appropriate IRS interest reduction request form.
The taxpayer must include the circumstances of the matter, the period to which the interest applies or the interest reduction period, the type of tax involved, the time when the IRS first notified them of the interest owed on the tax liability, and why a reduction in interest should be granted on the justice. Keep in mind that a temporary delay in collection will increase your tax debt because you will be charged penalties and interest until you pay the full amount. If you give the information to your tax lawyer, he can present this evidence to the IRS and negotiate the matter for you personally. When you work with a tax representative, they will perform an in-depth review of your tax transcripts to identify the penalties and interest imposed on you.
When the IRS sends you an additional tax bill (for example, from an audit), it usually adds penalties and interest. As a taxpayer, when faced with large tax liabilities, your debt increases significantly due to additional penalties and interest. Penalties are authorized as long as you file or pay your taxes after the deadline, are determined to owe additional taxes, or do not file all the required tax forms. Accuracy-related sanctions are generally due to the neglect of undervalued taxes or a substantial underestimation of taxes.
A common complaint I receive from many of my clients is that their liability to the IRS has increased substantially because of the penalties and interest that have been added to the account (most of these customers are considering filing a reduction in IRS penalties). IRS penalties are calculated very differently, so if you're not sure, don't worry, your tax professional will also know the process and handle it for you. However, if you're struggling financially to pay tax penalties and IRS interest, an IRS tax professional can reduce or eliminate the amount by demonstrating good cause for not filing taxes on time. With this in mind, familiarize yourself with the different types of penalties and interest that the IRS charges on your tax balance, as well as the procedures and methods used to calculate interest and penalties.
You can start making quarterly estimated tax payments and, hopefully, this will compensate for any IRS underpayment penalties that may arise. When seeking to reduce or eliminate IRS tax penalties, it's always best to have a tax representative handle your case. On the date income taxes are evaluated, the IRS has ten years to collect these taxes, penalties and interest. They have more than one hundred and forty different federal tax penalties that can be imposed for a wide variety of issues, including: tax fraud, penalties related to accuracy, penalties for late filing, penalties for late payment, non-payment of a tax and filing a frivolous return.