Penalty and Interest
If an individual taxpayer or business files their tax return late, underpays or fails to pay taxes owed by specified deadlines, the IRS can assess failure-to-file penalties, failure-to-pay penalties, late-filing penalties, late-payment penalties, estimated tax penalties, and accuracy related penalties in addition to interest on the taxes due and the penalties assessed. In addition to the interest and penalties assessed by the IRS, state revenue departments will also assess penalties and interest on tax debt that remains unpaid or is paid late. The taxpayer will continue to accumulate interest and penalties until the tax debt is resolved which can result in substantial sums owed in addition to the original tax.
The IRS currently offers a first-time penalty abatement program that relieves taxpayers from failure-to-file and failure-to-pay penalties provided certain criteria are met. Interest charged on penalty amounts will be reduced or removed when that penalty is reduced or removed. If the taxpayer has a legitimate reason for not being able to file their returns or pay taxes owed in a timely fashion the IRS may also consider relief for “reasonable cause”. Some states periodically offer abatement or reduction of penalties and/or interest during specified amnesty periods.
The Prager Metis Tax Controversy professionals can help determine if you meet the qualifications for the various abatement programs and assist you in applying for relief.
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