Do You Need Tax Penalty Relief?

Yes, in almost every circumstance the IRS will apply a penalty for late filing. There are two circumstances under which you will not face a penalty for unfiled taxes:

1. The IRS determines that you are owed a refund
2. You file an extension and pay your tax bill by the extended date

For every month or partial month past the filing deadline, the IRS adds a late penalty equal to 5% of the back taxes due, up to 25% of the total tax bill.

You can also face a late payment penalty if you owe back taxes, even if you haven’t filed. The late payment penalty is 0.5% of the tax amount unpaid, up to a maximum of 25%.

The penalty for failing to pay taxes on time is generally 0.5% per month or partial month, from the day after the taxes are due. The failure to pay penalty can accrue to a maximum of 25% of your unpaid taxes.

The penalty for failure to deposit 491 payroll taxes progressively increases the later the payment is made. The schedule and penalties are as follows:

• 1-5 days late: 2% of the past due amount
• 6-15 days late: 5%
• 16+ days: 10%
• 10+ days past receipt of notification from IRS: 15%

The penalties are applied to each calendar day past the due date of the payroll tax deposit.

It is important to note that a Failure to Deposit penalty can be applied based on failure to meet any one of three requirements for paying 941s.

1. The deposit must be paid on time;
2. The deposit must be made in the correct amount; and
3. It must be paid by the correct procedure.

You may be eligible for penalty abatement if you can demonstrate a case for reasonable cause or the handful of other claims under which a penalty relief request may be approved.

If you have not had any prior compliance issues, your chances of success are greater. Penalty abatement is more difficult to secure if you have previously incurred penalties. It will be necessary to provide proof that the failure to comply was due to a situation beyond your control.

Our tax relief experts can assess your circumstances in a free initial consultation and make a recommendation.

It depends on whether you have a balance owing and the date of your Refund Statute Expiration Date (RSED). The RSED is three years from the date you originally filed or two years from the date the tax was paid.

If the IRS has already collected your penalty, there are three possible scenarios:

1. The deposit must be paid on time;
2. The deposit must be made in the correct amount; and
3. It must be paid by the correct procedure.

Penalties can be negotiated, but interest on back taxes cannot be reduced. Interest is compounded daily and starts to accumulate on unpaid taxes one day after the due date, until all back taxes are fully paid. The interest rate varies and is adjusted quarterly.

The IRS uses an automated tool called the Reasonable Cause Assistant to screen penalty abatement applications. This tool makes an initial determination based on rules but doesn’t take into consideration the taxpayer’s circumstances. The RCA screening often results in penalty abatement denial letters that don’t address the specifics of the case. If your reasonable cause application is denied, you can appeal the RCA determination to secure a fair hearing and potentially achieve tax debt abatement.