How to Eliminate Tax Penalties & Interest
The IRS requires all taxpayers to file and pay their taxes on time. To avoid interest and penalty, the taxpayer must file taxes by the due date. Not filing or paying your taxes on time can result in a maximum penalty (including interest) of up to 25 percent. As a last resort, the government may levy your property to satisfy the tax debt. If the IRS has assessed your account and charged you penalties and interest, under certain circumstances you can have them removed.
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Instructions
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Send a written and signed statement to the IRS, citing reasonable cause, which is also referred to as a Request for Abatement. You will have to provide the IRS with adequate reason as to why you did not file or pay your taxes. Possible reasons include: for reasons beyond your control your records were destroyed; because of a natural disaster you were unable to pay your taxes and generate income; your business suffered a crime; because of theft you could not locate your records; and prolonged unemployment.
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Complete and mail Form 843--Claim for Refund and Request for Abatement--to the IRS. Use this form if the IRS provided you with erroneous written advice that resulted in you being penalized. You can also use this form if the request for abatement is concerning income, employment, gift, estate or excise tax. Check the box indicating the reason you are requesting the abatement, and sign the form.
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Include the appropriate documents with your abatement request. You will be required to show proof of the circumstances that caused you not to file or pay your taxes. If the IRS provided you with erroneous advice resulting in the penalties, attach the original request for advice you sent to the IRS, the written request they gave you and any notices of the penalties you received and would like to have eliminated.
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Tips & Warnings
If you are unsure of how to word your abatement statement, or if you are uncomfortable with dealing directly with the IRS, hire a tax professional.
References
Resources
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