If you’ve received a notice from the IRS stating that you owe penalties for late tax filing, late payment, or missed employment tax deposits, don’t rush to pay. You may not have to pay these IRS penalties at all.

The IRS frequently issues penalties for late tax returns, unpaid taxes, or missed employment tax deposits. However, you can use several strategies to reduce or eliminate these penalties—and in some cases, even get a refund if you’ve already paid them.

Common IRS Penalties and Their Consequences

Understanding the types of IRS penalties is key to knowing your options for penalty abatement:

• Late Filing Penalty: This can be up to 5% of the unpaid tax for each month the return is late, capped at 25% of the total tax due. For partnerships and S corporations, the penalty is $245 per partner or shareholder per month.
• Late Payment Penalty: The IRS charges 0.5% of the unpaid tax per month, maxing out at 25%.
• Failure to Deposit Employment Taxes: Penalties for missing employment tax deposits range from 2% to 10%, depending on how late the deposit was.

How to Avoid or Reduce IRS Penalties

There are several proven ways to reduce or eliminate IRS penalties. Here are three of the most effective strategies:

1. First-Time Penalty Abatement: If you’ve never had a penalty or it’s been more than three years since your last one, you may qualify for the IRS’s first-time abate program. This is one of the simplest ways to remove penalties for late filing, late payment, or missed deposits. If your tax history is clean, you can easily get relief through this method.
2. Partnership Penalty Relief: If your business is a partnership with 10 or fewer partners, and all partners filed their tax returns on time, you may be eligible for relief under Revenue Procedure 84-35. This is a lesser-known but highly effective way to avoid IRS penalties for partnerships.
3. Reasonable Cause Penalty Relief: If the first two options don’t apply to your situation, you can still request penalty relief by proving you had a reasonable cause for filing or paying late. Common reasons include illness, natural disasters, or other significant events that made it difficult to meet IRS deadlines.

Steps to Take for IRS Penalty Relief

If you believe your penalties qualify for IRS relief, I can assist you in navigating the process. Many penalties can be removed with a simple phone call, but knowing the right approach and what to say when speaking with the IRS is crucial for success.

If you’ve already paid the penalties, you can still apply for a refund by filing IRS Form 843. This form allows you to request a refund within three years of filing the return or within two years of paying the penalty.

Contact us for Help with IRS Penalty Abatement

If you’d like assistance with IRS penalty abatement or want to explore your options, call us at (657) 413 0211.

Interested in learning about Corporate Transparency Act: Essential Guide to Beneficial Ownership Information Reporting for 2024, here is a complete guide.