Receiving a penalty notice from the IRS can be stressful, but don’t rush to pay it just yet. You might qualify to have these penalties removed or even refunded. This guide breaks down effective steps for relief and how Private Tax Solutions can assist.

 

Common IRS Penalties and Their Costs

The IRS applies substantial penalties for:

1. Late Tax Filing: Individual or C corporation returns incur a 5% penalty on unpaid tax each month, up to 25%. Fraud-related cases face a 15% monthly penalty, maxing out at 75%.
2. Late Payments: The IRS charges a 0.5% penalty on unpaid tax per month, up to 25%.
3. Employment Tax Deposit Errors: Failing to deposit employment taxes can result in:

• 2% penalty if within 5 days late
• 5% if 5-15 days late
• 10% if more than 15 days late

For instance, missing a $4,000 employment tax payment by six days incurs a $200 penalty.

 

Fast Ways to Get IRS Penalty Relief

1. First-Time Abatement

For those with a clean record in the last three years, the IRS may waive penalties using a “first-time abate.” Private Tax Solutions can assist you in using the right terms to ensure you qualify.

 

2. Relief for Small Partnerships

If you missed filing a partnership return, and your partnership has 10 or fewer partners, relief might be available if all partners filed on time. Ask for this by referencing “Revenue Procedure 84-35.”

 

3. Reasonable Cause Relief

If neither of the above applies, provide a legitimate reason for late filing or payment, such as illness, natural disaster, or inability to obtain critical records. The IRS accepts detailed, specific explanations and supporting documents.

 

Key Takeaways

1. Start with First-Time Abatement: Often the fastest route for qualifying businesses.
2. Check for Small Partnership Relief: For partnerships with fewer than 10 partners.
3. Use Reasonable Cause: If other options aren’t available, a solid reason may qualify you.

 

Already Paid? Use Form 843 to request a refund within three years from the filing date or two years from payment.

 

Interest Relief: Penalty interest is also reduced if the penalty itself is waived.

 

For personalized help, Private Tax Solutions can guide you through these steps and ensure a well-documented approach for successful penalty removal.