Receiving any kind of mail from the IRS—with the exception of your long-awaited tax refund—can be a nerve-wracking experience, especially when Uncle Sam comes bearing bad news. Maybe you didn’t file your taxes on time, or maybe you have an outstanding tax bill that needs immediate payment—either way, the IRS has hunted you down and pinned a nasty penalty on your account. If you’re like most people faced with an IRS penalty, something likely came up that prevented you from fulfilling your tax duties. Fortunately, the IRS offers taxpayers an opportunity to challenge penalties and seek relief. Using this guide, we’ll walk you through the types of common IRS penalties, how to appeal IRS penalties, and how to get IRS penalties waived.
- What Types of Penalties are Eligible for Relief?
- What are the Different Types of Tax Penalty Relief?
- How to Get IRS Penalties Waived or Appealed
- $435 for returns due on or after 1/1/2020*
- $210 for returns due between 1/1/2018 and 12/31/2019
- $205 for returns due between 1/1/2016 and 12/31/2017
- $135 for returns due between 1/1/2009 and 12/31/2015
- $100 for returns due before 1/1/2009
- The 0.25% penalty applies to individual tax filers who have elected to repay their debts through an installment agreement.
- The standard penalty is 0.5%
- The 1% penalty applies to individual filers who have not paid their outstanding balance within 10 days of a notice of intent to levy.
- 2% for 1-5 days late
- 5% for 6-15 days late
- 10% for 15 days or more late
- 10% for deposits not made electronically
What are the Different Types of Tax Penalty Relief?There are three categories of penalty relief offered by the IRS; reasonable cause, penalty abatement, and statutory exception. Depending on your particular situation, you may qualify for a reduction or total elimination of penalty fees under valid circumstances.
How to Get IRS Penalties Waived or AppealedTo dispute IRS penalties, you’ll first need to understand which type of penalty relief applies best to your case. Use the guide below to help steer you in the right direction.
Reasonable CauseReasonable cause is embodied by circumstances out of your control that prevented you from taking care of your taxes in a timely fashion. While forgetfulness will not hold up in the eyes of the IRS, there are a number of other legitimate occurrences that would qualify for reasonable cause, including:
- Fire, natural disaster, casualty, or other serious disturbances count as reasonable cause.
- Inability to obtain pertinent records
- Death, serious illness, incapacitation of the taxpayer or an immediate family member (related to the tax file)
Penalty AbatementIRS penalty abatement is an administrative waiver designed to grant taxpayers relief from Failure to File, Failure to Pay, and Failure to Deposit penalties if specific criteria are met. Taxpayers who have a clean taxpaying history aside from may qualify for first-time penalty abatement (FTA) so long as this is their first issuance of a Failure to File, Failure to Pay, or Failure to Deposit penalty. In the eyes of the IRS, everyone is entitled to one mistake, and first-time penalty abatement accommodates it. The first-time penalty abatement applies if the following are true of your situation:
- You weren’t previously required to file a return or have no charged penalties for three tax years prior to the tax year in which you received the penalty.
- You have filed all required forms or filed an extension of time to file.
- You have paid, or arranged to pay, any outstanding tax balance.
Statutory ExceptionIf you received incorrect written advice from the IRS that resulted in a penalty, you might qualify for statutory exception relief. You will need to present supporting documentation to defend your case, including the following paperwork:
- Your written request for advice.
- The incorrect or misleading advice you relied on provided by the IRS.
- The report of tax modifications identifying the penalty or addition to your tax and any relevant items relating to the erroneous advice.