Here’s How to Avoid IRS Penalties

Taxes are due this year on April 15 - just a week from today! And if you're late with your tax return and owe money to the IRS, serious penalties could apply.

Both the failure-to-file and late payment penalties have the potential to cost you a lot. The former will cost you 5% of your unpaid tax debt for each month or partial month your return is late, up to 25% of that total. Meanwhile, the late payment penalty will cost you 0.5% per month or partial month your payment is late, up to 25%.

The good news is, if it's your first time incurring one of these penalties, the IRS may be willing to go easy on you via a process known as first-time abatement. But you'll need to meet certain criteria. Specifically, you'll need a good tax compliance history, which the IRS defines as:

-You filed your tax return for the past three years before the tax year in which you incurred a penalty
-You didn't receive any penalties during the three years prior to when you're asking for first-time abatement

The IRS isn't going to somehow access your bank account and remove funds from it to collect its penalties. Rather, it's going to notify you in writing that you've incurred a penalty and give you instructions on how to pay it. That notice will generally have a phone number on it that you can call for further information. That's also the phone number you can call to request first-time abatement.

Post a Comment