Spokane IRS Penalty Relief
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Not paying the IRS what they think you owe: millions of Americans do it every year, according to the agency’s own records. Many assume that there is nothing they can do once the IRS comes after them for unpaid balances, tacking on penalties and interest all the way, but the truth is that you can not only sometimes adjust the amount owed — eliminating it entirely, in rare cases of gross errors by the IRS — but you can also chip away at the penalties themselves.
Known as IRS penalty abatement, it’s an option most filers have access to but don’t even know about. When they agree to pay the amount they allegedly owe in full, they are effectively throwing away money they could have been saving by requesting penalty relief.
Instant Tax Solutions is here to help you understand all of your rights and the options you have for avoiding IRS penalties. We can help you explore all opportunities to reduce the amount you owe, and we can also help you reach an agreement to get your financial future back on track.
When you are ready to start taking action about your back taxes — and exploring your options for getting rid of some penalties — call our Spokane tax professionals to schedule a free consultation and accounts review. Call (888) 886-5526 or contact us online to schedule your free appointment today.
How to Arrange for Spokane IRS Interest Charges Removal
When the IRS charges a penalty, it will also apply interest to the unpaid balance created by that penalty. The good news is that when the penalty is removed, that interest is removed along with it.
However, you cannot ask the IRS to waive the interest amount by itself. Instead, you have to request to get rid of the penalty, and the interest attached will be removed along with it.
In the agency’s own words: “By law, we cannot remove or reduce interest unless the penalty is removed or reduced.”
How Can I Get Approval for IRS Penalty Removal?
There are many different circumstances in which the IRS would grant approval for a request to remove certain penalties, which are outlined below.
IRS Penalty Waiver
Known officially as a “Penalty Relief by Administrative Waiver,” this is one of the most common ways that a particular penalty is removed. Most individuals or businesses seeking this type of relief will be using the First Time Abate waiver.
Like the name sounds, a First Time Abate is available to filers who face their first penalty for a failure to file, failure to pay, or failure to deposit an estimated tax payment within the past three filing years.
Other reasons for receiving a waiver include automatic waivers provided after certain legislation or policy was enacted and individual waivers granted at the discretion of the IRS. If you requested a waiver and did not receive it, you have the option to appeal.
Penalty Removal in Light of an Adjustment or Amended Return
If you can prove that you were assessed the incorrect amount of taxes, you can often seek to lower or eliminate penalties connected to that past-due amount. Filers have the option to dispute assessments, appeal decisions, and file an amended tax return up to three years after the initial filing deadline.
Any of these actions can cause your back tax balance to be changed. Your penalties and related interest will be adjusted, as well.
In some cases, such as if you had a good-faith reason to believe you did not owe any of the taxes assessed, you can have the penalty removed entirely.
Statutory Exceptions
A statutory exception is an automatic penalty removal that can apply when specific laws or rules mandate that the IRS has to remove them. These include situations where the IRS provided incorrect written advice or where you had mailed your return on time but still received a failure-to-file penalty.
They also include special incidents that make it extremely difficult to file on time, such as when you were living in a federal disaster area affected by a severe weather incident or other mishap or when you were involved in U.S. military operations in a combat zone.
Reasonable Cause
A “reasonable cause” penalty abatement is any relief granted for reasons other than those listed here. It is up to the filer to provide the justification, which should be based on both applicable laws and their individual situation.
Typically, the IRS is looking for someone who A) acted in good faith to pay their balance or was not fully aware they had a balance, despite best efforts, and B) experienced some hardship or other valid reason why they failed to take action in such a way that resulted in a penalty.
In the IRS’ own words: “Reasonable cause is determined on a case-by-case basis considering all the facts and circumstances of your situation.”
Instant Tax Solutions has extensive experience petitioning the IRS for reasonable cause-based penalty abatements as well as other forms of relief. Presenting a valid argument and completing the needed documentation in full can be challenging for the inexperienced, which is why we are here to help you maximize your chances of receiving the relief you need.
What Are the Spokane IRS Interest Rates?
Every penalty accrues its own interest, which compounds daily. The interest rates for these penalties are set according to the current federal short-term rate, plus an extra 3%.
The federal short-term interest rate is assessed once every three months. The federal short-term interest rate in June 2023 was 4.43%, making the total interest rate for IRS penalties 7.43%.
This amount is certain to change periodically, so refer to a tax professional or the latest IRS announcements for the current rate.
What IRS Penalties Can Be Waived or Avoided?
The IRS lists the following types of penalties as eligible for relief:
Information Return
Applied when the filer fails to provide a requested information return form or a payee statement on time.
Failure to File
Applied when the filer fails to submit their tax return or other expected document by the set due date without an approved extension.
Failure to Pay
Levied any time the filer has missed a due date to render payment. This includes year-end tax balance payments, estimated quarterly tax payments, and other expected contributions.
Accuracy-Related
Penalties related to underpayment, most often because of underreported income or the claiming of credits and deductions to which the filer wasn’t actually entitled.
Failure to Deposit
Connected to employers that fail to make their employment tax deposits on time, in full, and using the right method required by the IRS.
Dishonored Check
Issued when a check or other payment fails to clear, either because of unavailable funds, errors in the information provided, or other oversights made by the filer.
Underpayment of Estimated Tax by Corporations & Individuals
All businesses and certain individuals are expected to submit quarterly estimated payments on income. These payments must be rendered on the 15th of the last month of each quarter.
Missing these payments or failing to pay the full amount that should have been estimated results in an unpaid tax balance along with a penalty. These penalties may even be applied if you have a negative balance by the end of the year and are owed a refund.
Other Penalties, as Applicable
Not every penalty is available for relief, but the IRS makes accommodations for requests to abate penalties on a case-by-case basis. Never assume you aren’t eligible for penalty abatement.
Always check in with an experienced tax professional to see if you qualify for an IRS penalty waiver.
Other Forms of Tax Relief You May Qualify For
Depending on your circumstances, you may qualify for additional forms of relief. Some of the most common include:
Offer in Compromise
This refers to an arrangement made with the IRS to pay down a portion of the amount you owe in exchange for forgiveness of the remaining balance. The payment can be rendered as a lump sum or in a series of payments.
Installment Agreements
An installment agreement allows you to pay back the amount you owe in manageable monthly installments. Depending on the arrangement, you may be able to stop the further assessment of penalties and interest once you begin making timely payments.
You may also be eligible for penalty abatement, allowing you to lower the overall balance you owe.
Amended Tax Assessment
The IRS is far from perfect and can make mistakes in their assessments of the taxes you owe all the time. Other times, you may have new information for them related to a correction in a return you filed within the last three years.
In either case, you can petition to have your back tax amount adjusted and reduce or eliminate certain penalties associated with that balance.
Currently Not Collectible
If you’re unable to pay the taxes you owe because of a hardship or other reasonable circumstance, you can request to have collection actions paused while you take time to gather documentation and get your finances in order. Penalties can be paused during this period in certain situations and can even be eliminated entirely in connection with a waiver or other request.
Get Help With Receiving a Spokane IRS Penalty Waiver
We have years of experience helping people and businesses just like you when it comes to reducing the penalties and taxes they owe. Find out what forms of relief you could qualify for when you call (888) 886-5526 or contact us online to schedule a free consultation and financial review today.
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