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When Is Penalty Abatement Available for Delinquent Back Taxes?

Posted on in Tax Services

texas tax consultantFor most people and businesses in the United States, taxes are unavoidable. Taxpayers who owe money to the IRS will not only need to pay any delinquent back taxes, but they may also be subject to failure-to-pay penalties. However, taxpayers may have options for penalty relief in some cases. By understanding the different types of tax penalty abatement options that may be available, a taxpayer can take steps to minimize the amount they may be required to pay.

First-Time Penalty Abatement and Reasonable Cause

Taxpayers may qualify for relief from tax penalties if they can show that they were unable to pay the amount owed due to issues that they had no control over. The most common form of relief is known as first-time penalty abatement. To qualify for this type of abatement, a taxpayer must not have had any tax penalties within the three years prior to the year for which they have received a penalty. They must also file all tax returns that are currently required or ask for an extension on a return that is due. Before receiving penalty abatement, they must either pay or make arrangements to pay any delinquent taxes. Because failure-to-pay penalties will continue to accrue until the taxes owed are paid in full, a taxpayer may want to wait until the amount due has been paid off before applying for first-time penalty abatement.

A taxpayer who does not qualify for first-time abatement may be able to receive penalty relief due to reasonable cause. In these cases, a taxpayer will need to show that they took all of the reasonable and necessary steps to pay taxes as required, but they were unable to pay the full amount owed through no fault of their own. Valid reasons that a taxpayer may be able to receive relief include an illness or injury that left them incapacitated, the death of a family member, or a fire or natural disaster. A taxpayer will need to provide evidence supporting their claim, such as medical records related to an injury or illness or documentation detailing natural disasters or other emergencies.

To determine whether a taxpayer qualifies for penalty abatement due to reasonable cause, the IRS will look at the circumstances of their case to determine whether the issues they experienced prevented them from paying taxes that were owed or meeting other ongoing responsibilities. The IRS will also consider whether the taxpayer took steps to pay delinquent taxes or address tax-related issues once they were able to do so.

Contact Our South Texas Enrolled Tax Agent

If you owe back taxes to the IRS, you may be concerned about your ability to pay these amounts and whether you will face penalties. Ed Villanueva & Associates, Inc. can help you determine whether you qualify for penalty abatement, and we will provide you with representation as you work with the IRS to resolve your tax issues. Contact an experienced San Antonio tax consultant at 210-382-9015 to arrange a free consultation today.

Sources:

https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief

https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-first-time-penalty-abatement-or-other-administrative-waiver

https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-reasonable-cause

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