Reduction of IRS Penalty and Interest

Abatement of Penalty

By far the accrual of penalties and interest are the most frustrating topic of those who owe back taxes.

The IRS charges interest, late payment and late filing penalties for each month you don’t file or pay the taxes due. Initially the late payment and late filing charge is ½% each per month with the late payment plan reduced to ¼% if you enter into a formal payment plan. The interest rate fluctuates quarterly. The late payment penalty maxes out at 25% as does the late filing penalty. Interest never maxes out.
The IRS can eliminate or reduce a penalty for a reasonable cause if you request it. The term the IRS uses for removing or reducing penalties is “abatement”. About one-third of IRS-imposed penalties are later removed. Only interest that has accrued on the penalties can be reduced unless it was erroneously applied or if it was due to lengthy delays by the IRS. The only way to completely remove all penalties and interest is through an Offer in Compromise.
To convince the IRS to reduce or remove your penalties Sirius would demonstrate that you showed “reasonable cause” for your failure to pay and/or file the tax return(s). The Internal Revenue Manual (IRS Policy Statement P-2-7) states:
Any sound reason advanced by a taxpayer as the cause for delay in filing a return, making a deposit…or paying tax when due will be carefully analyzed…
The few examples (this is not all inclusive, but an idea on what they accept):
• Death or serious illness in the family.
• Unavoidable absence of the taxpayer.
• Destruction by fire or other casualty.
• Lack of funds (only if you exercised ordinary business care and prudence).
• Embezzlement or Theft.

You have to demonstrate to the IRS and state taxing authorities that you acted with “ordinary business care and prudence” but still were unable to file and/or pay your taxes on time. You need to describe to the IRS exactly what efforts were made to repay the debt.  A lawyer who represents himself is a fool for a client and the same thing can be said about a taxpayer who represents himself has Time and again I am successful in removing penalties my clients by use of recent case law and statutes. 

Contact me today:  Nick Hartney, E.A. Phone: 720-340-4065; Email:
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