IRS Penalties and Abatements

By Joe Alabi EA MACCT (Taxation) CTRC

Enrolled Agent/ Certified Tax Resolution Consultant.

Education & Training with FishCoin Tax Solutions IRS 00139079-EA

August 2, 2023 1:32 PM

I represent taxpayers in New Hope, Minnesota and all the 50 States in the United State before all administrative levels—examination, collection, and appeals—of the Internal Revenue Service (IRS) and Minnesota Department of Revenue.

Recently a taxpayer called my office in New Hope, Minnesota and he wants to pay the tax debt owed but does not want to pay the penalties and interest associated with the tax debt. I had to explain to him that not all penalties qualify for a relief and that other factors have to be considered. It is difficult to remove penalties and interest but there are certain penalties eligible for a tax relief. The IRS penalties that are eligible relief include the following:

Failure to file a tax return: The failure -to-file penalty is normally 4.5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes. For example, you forgot to file an extension and filed your tax return on December 20th 2XXX that was due in April 15th 2XXX and you owe $2000 in upaid taxes. The IRS will assess a failure to file penalty of 4.5% on each month you did not file. In this case, May to October you will be assessed the 4.5% penalty until the penalty reaches the 25% on the $2000 owed.

Failure to pay on time The failure to pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due (April 15th). It goes up to 25% of the unpaid taxes.

Failure to deposit certain taxes as required. The failure to deposit is mainly for employment taxes (941’s and 940’s). There are three things that could trigger the penalty