While IRS penalties can be intimidating, there are many situations where someone might qualify to have them removed. While few taxpayers understand how to navigate penalty relief programs on their own, there are a wide range of systems in place to help ease the burden that these penalties might impose.
For example, imagine a scenario where, due to unexpected medical bills or a sudden layoff, a taxpayer was not able to file their federal income taxes on time. As a result, they’d receive a notice from the IRS imposing both the Failure to File and Failure to Pay penalties — but help is still available.
The taxpayer could qualify for the First-Time Penalty Abatement, which is a penalty relief program available for taxpayers who have a clean compliance history. Similarly, they could also take advantage of Reasonable Cause Relief, which can be triggered when circumstances outside the taxpayer’s control prevent them from meeting their tax obligations.
So, before you try to tackle your IRS penalties alone, reach out to our team. We can review your situation and help you determine whether you qualify for an existing IRS penalty relief program, an IRS interest charges removal, or other forms of assistance.
At Instant Tax Solutions, we’re here to help you forge a better path forward. So don’t hesitate to reach out to our team today.
Call (888) 485-8109 to schedule your free appointment today.
Boise IRS Interest Charges Removal
Penalties and interest often go hand in hand when you owe back taxes to the IRS. While penalties are imposed for failing to file or pay taxes on time, interest accrues on the unpaid tax debt, including the current amount of penalties.
Understanding how interest works and knowing that it can be removed under certain circumstances is crucial for anyone facing tax troubles in Boise.
Understanding Boise IRS Interest Rates
Interest on unpaid tax debt is essentially the cost of borrowing money from the IRS. It’s calculated based on the federal short-term interest rate plus an additional percentage.
The interest compounds daily, which means it keeps adding up on your outstanding balance.
The IRS uses interest to encourage taxpayers to pay their debts promptly. It serves as a financial incentive to settle your tax obligations as soon as possible.
However, if you’re already struggling with a tax debt, the accruing interest can quickly become a significant burden.
The good news is that, under certain circumstances, you can have the interest charges on your tax debt removed. The most common situation where this may be removed is when the IRS acknowledges that the interest accrued due to their own errors or delays.
In these cases, you may qualify for interest abatement.
To request to have your interest charges removed, you’ll typically need to provide strong documentation (and a clear explanation) showing that the IRS was at fault. Make sure to flag any instances in which the IRS made a processing error or issued an incorrect notice.
How Are IRS Penalties Calculated?
While IRS penalties are imposed at the federal level, they are still affected by Idaho tax laws and regulations at the state level.
So, while the IRS will impose penalties for various ‘noncompliance situations,’ the total cost that comes with each penalty will be calculated with its own unique formula. As previously noted, two of the most common penalties are the Failure to File Penalty and the Failure to Pay penalty.
Let’s break down how each of these is calculated:
- Failure to File Penalty: This penalty is imposed when a taxpayer doesn’t file their tax return by the necessary due date. It’s typically assigned as 5% of the unpaid taxes for each month that the return is late, up to a maximum of 25% of the unpaid taxes.
- Failure to Pay Penalty: Similarly, this penalty is also applied when a taxpayer misses the deadline for traditionally filing their return, but it carries a smaller penalty, just .05% of the user’s unpaid taxes for each month until they pay up.
Keep in mind that these penalties can accrue simultaneously and build up to a combined penalty of 47.5% of your total original unpaid tax debt if left unpaid for several years. Meanwhile, interest charges will also continue to accrue on the outstanding balance, which can quickly lead to a hefty — and often overwhelming — bill to pay.
To make matters worse, state penalties can also apply if you fail to meet your state tax obligations. That said, the good news is that if you receive IRS penalty relief at the federal level, it will typically have implications for your state taxes as well.
However, not all federal tax changes will automatically apply, so be sure to consult with an experienced tax expert if you’re unsure about what penalties you still need to repay.
Understanding the Different IRS Penalty Relief Programs
When facing IRS penalties, Boise residents will have several relief options to explore. Each program will cater to different taxpayers’ situations and comes with its own eligibility criteria.
Here are three of the most common IRS Penalty Relief Programs:
First-Time Penalty Abatement (FTA)
- FTA is designed to assist taxpayers who have a clean compliance history and who have not incurred any penalties in the past.
- Qualifying recipients can receive relief from both the Failure to File and Failure to Pay penalties.
- This program will allow for a one-time penalty waiver and ultimately allow the taxpayer to make a fresh start.
Reasonable Cause Relief
- Reasonable Cause Relief is a strong option for taxpayers who can demonstrate that their failure to comply was due to an outstanding circumstance outside of their control.
- Typically, those who experienced a serious medical emergency, natural disaster, or other extraordinary situation may be eligible. That said, in order to qualify, the taxpayer will need to provide substantial documentation — and a persuasive explanation — outlining their situation.
Statutory Exception Relief
- If the IRS provided the taxpayer with incorrect advice or caused some other error when reviewing your return, you may be able to take advantage of statutory exception relief.
- That said, this relief program is governed by strict legal provisions, and you’ll want to consult a seasoned tax professional to see if you may be eligible.
How to Apply for a IRS Penalty Relief
Once you’ve determined which type of IRS penalty relief program you’re eligible for, you’ll need to begin the application process. Most penalty relief requests are made by filing Form 843, i.e., the “Claim for Refund and Request for Abatement.”
There, you’ll need to provide detailed information about your specific tax situation, as well as the penalties you’re seeking relief from. Make sure to clearly outline why you’re requesting relief and why you believe you qualify for the relevant program.
You’ll also need to file any supporting documentation that can help strengthen your case. Where needed, this paperwork might include medical records, disaster declarations, or any other evidence that demonstrates your eligibility for relief.
How Long Does the IRS Penalty Process Take?
Depending on your specific situation and the relief program you pursue, your full penalty relief process will likely take anywhere from a few weeks to several months to resolve.
For example, First-Time Penalty Abatement requests are typically processed relatively quickly, but it will still take a few weeks for the IRS to receive your request, review your situation, and remove the penalties. Conversely, programs like Reasonable Cause Relief can take longer because they often carry extensive documentation and may require a fair amount of back-and-forth with the IRS as they go over what happened in your particular situation.
Other factors like the IRS caseload can affect processing times, as can the accuracy of your application and supporting documentation. For this reason, it’s to your advantage to work with a tax expert, as we can help you make sure that you’ve collected all of the necessary paperwork and organize your explanation to ensure it’s quickly highlighting everything that led to your outstanding circumstances.
What if I Don’t Qualify for IRS Penalty Relief?
Even if you don’t qualify for a traditional IRS penalty relief program, there are still several avenues to explore.
For some, it may be enough to simply work with the IRS to establish a payment plan that allows you to break your total debt down into manageable monthly payments. For others, if you cannot pay your total tax debt without enduring significant economic hardship, you may qualify for an Offer in Compromise.
An Offer in Compromise is essentially an agreement between the taxpayer and the IRS that allows the taxpayer to settle their tax debt for less than the full amount they owe.
Fill Out a Boise IRS Penalty Waiver, Or Explore Your Options With Our Team Today
If you’re struggling to pay back the penalties you’ve incurred or are unsure that they were rightfully applied in the first place, reach out to our team today. At Instant Tax Solutions, we can review all of the details of your specific situation to help you determine whether you qualify for an existing penalty relief program or can take advantage of another avenue.
We’re well-versed in everything from IRS penalty removal to the different types of IRS interest rates, so don’t hesitate to bring any problem our way. We can even help you fill out your first IRS penalty waiver or help you ensure you’re working towards a stronger financial future.
So don’t hesitate to reach out to our team today. Call (888) 485-8109 or contact us online to schedule your free appointment today.