What Is a Penalty Abatement and How Do I Get One?

Tax season can be challenging for anyone, especially if you owe taxes. When filing and paying your taxes, you might end up having to pay some interest or penalties. These penalties are a signifier from the IRS that you have not paid the whole amount or have otherwise made an error on your taxes. If left unmanaged, the interest on your leftover tax amount may increase and leave you with a higher tax balance than you expected.

Fortunately, the IRS offers a first-time abatement for taxpayers who qualify. If you meet certain requirements or circumstances, the IRS may offer relief by lowering your tax balance or waiving your penalties. At Polston Tax, we are experienced in helping our clients prepare tax returns and resolve tax debts. With our tax resolution services like penalty abatements, we can help reduce the burden of your tax liability.

Common Penalties

Failing to pay your taxes on time or in full can result in you owing even more money on your personal or business taxes. Not paying your taxes at all will also produce a penalty. Below are the most common penalties an individual may face for not meeting their tax liability.

Failure to File

You may receive a Failure to File penalty if you did not file your taxes before the quarterly or annual deadline. Keep in mind that quarterly deadlines for 2023 are as follows:

• April 18, 2023
• June 15, 2023
• Sept. 15, 2023
• Jan. 16, 2024

If you filed and received an extension for your taxes, your deadline is October 15, 2023.

According to the IRS, the amount of penalty you receive will depend on how late you filed your taxes and the amount of money you still have left to pay. A Failure to File penalty means you will be charged 5% of the amount of the unpaid taxes for every month that you were late on your tax return.

However, this amount will not exceed 25%, which means it won’t charge you for longer than five months. You will be charged interest on this penalty, but the date the interest begins is different for each penalty or if you have a combination of Failure to File and Failure to Pay penalties.

If you’re over 60 days to file your tax return, the minimum penalty for Failure to File in 2022 is $435 or $450 in 2023. If the total of the tax amount required on the return is less than these amounts, however, you would pay that amount instead.

Failure to Pay

A Failure to Pay penalty can result if you do not pay the amount of taxes as shown on your tax return. This type of penalty is calculated similarly to the Failure to File penalty, which is based on how long your leftover taxes have not been paid. You will be charged 0.5% of your outstanding taxes for every month you do not pay them in full. Like a Failure to File penalty, this amount will not exceed 25%.

In a case where you have both Failure to File and Failure to Pay penalties on your tax balance, specifically within the same month, then the IRS will reduce your Failure to File penalty according to your Failure to Pay penalty during that month. This means you will receive a total combined penalty of 5% — 0.5% for the Failure to Pay and 4.5% for the Failure to File — for each month you did not file your return.

If you set up a payment plan with the IRS, you can reduce your Failure to Pay penalty to 0.25% each month for the duration of the arrangement. However, if you fail to pay within 10 days of receiving a notice from the IRS, this penalty goes up to 1% a month.

Failure to Deposit

If you own a business and filed the employment taxes incorrectly or failed to pay them altogether, you may receive a Failure to Deposit penalty from the IRS. The penalty amount will depend on the number of days you are late to pay your deposit.

• 1 to 5 days late: 2% penalty
• 6 to 15 days late: 5% penalty
• Over 15 days late: 10% penalty
• Over 10 days late after receiving a notice: 15% penalty

Keep in mind that these penalty percentage amounts do not add up. If you are 18 days late, for example, you would only receive a penalty of 10% total.

Most of these penalties are assessed automatically, regardless of the taxpayer’s situation and will continue accumulating until the liability is paid in full. If you are assessed with penalties from the IRS, there are a few things you must do to qualify for the FTA penalty waiver and get IRS penalty relief.

A tax attorney at Polston Tax can help determine what penalties apply in your situation and work with you to come up with a solution.

What Is a Penalty Abatement?

If you meet certain qualifications as a taxpayer, you may receive a penalty waiver for your unpaid taxes from the IRS. Failing to make a payment, failing to file your taxes on time or making a tax filing error can all lead to penalties. As a result, you may receive a penalty — like the ones above — from the IRS. A penalty abatement enables you to waive these penalties if you’re eligible.

Qualifying for and receiving a penalty abatement is easiest when you have an experienced tax attorney from Polston Tax on your side. Let us know what your tax situation is and we’ll come up with a tax resolution together!

How to Qualify for an IRS Penalty Abatement

To qualify, you must be in compliance with your tax returns and your payments to the IRS. The requirements for this eligibility include:

• You must file an extension for all required tax returns
• You do not have any outstanding requests from the IRS

This means if you need to file a certain year’s tax return, you must file it before you can request a penalty abatement. You must pay or arrange to pay your leftover taxes to remain compliant. If your payments are current, you can request to be approved for an installment agreement or penalty abatement. Lastly, to qualify, you must have a clean penalty history, which means you must not have had any penalties from the IRS within the last three tax years in order to remain eligible for a penalty abatement.

Reach out to one of our tax attorneys at Polston Tax so we can help you determine whether you might qualify for an IRS penalty abatement.

How to Request an Abatement of Penalties From the IRS

Typically, you can choose from several methods to request penalty relief after the IRS has assessed a penalty:

• The first is over the phone. Some requests for penalty relief may be requested by calling the IRS directly.
• The second is by writing a letter to the IRS, called a penalty abatement request letter.
• The third option is to use a tax professional like Polston Tax to help you with the abatement process. A professional will help you file the necessary documents surrounding your penalty.

After you have paid the penalty, you can request a refund through Form 843. You must file the claim within three years of the return due date — or within two years after the date — you paid the penalty.

You may need supporting documents when you request a penalty abatement, such as:

• Death certificate: If you are claiming a family member’s death led to your inability to file on time, you will need a copy of the death certificate.
• Doctor’s notes: If you are claiming a serious illness led to your inability to file on time, you will need a copy of your doctor’s notes.
• Insurance claims: If you are claiming a natural disaster, fire or theft led to your inability to file on time, you will need a copy of your related insurance claim.

Make sure to submit copies of your documentation to the IRS and not the original documents. If you want to verbally request a penalty relief, it’s best if you get in touch with the closest IRS office and request a meeting. It is important to know that if your penalty abatement request is denied by the IRS, you can’t use the same reason to apply again.

Contact Polston Tax to Abate IRS Penalties

A penalty abatement can provide some relief when you’re facing back taxes. For many taxpayers who incur penalties, these are a result of unintentional infractions caused by financial constraints or incorrect advice. When your liability spans several years, you may want to use a penalty abatement on your largest penalty. Hire an experienced tax professional at Polston Tax to help you get the penalty abatement you need.

If you’re unsure whether you qualify for a penalty relief or you need help filing a waiver, Polston Tax can help! Our team of tax attorneys can assist you with filing your penalty abatement waiver and get you a resolution with the IRS so you can put your tax problems behind you! Call us today at 844-975-1611 or schedule your free consultation.