How to Avoid Penalty on Late Payment of Taxes to IRS

According to the Internal Revenue Service (IRS), all tax payments are due on or before the April 15 deadline. Taxpayers who do not pay taxes on time will be assessed a failure-to-pay penalty in the amount of 0.5 percent for each month the tax remains unpaid. Fortunately though, there are strategies which enable you to avoid the penalties for late payment to the IRS.

Instructions

1. 

   Tax penalties accrue quickly on unpaid taxes

   Call the IRS at 800-829-1040 to explain to the Customer Service Representative your reason for making the late payment. If your late payment was due to a reasonable cause such as illness, incarceration, or military service, the IRS representative will often remove the penalty over the phone. However, such abatement (removal of penalties) is usually reserved for taxpayers who have a history of paying and filing on time.

2. Mail IRS Form 843 to the local IRS office which processes claims for your area. If you are not sure which office processes claims for your area, visit IRS.gov. Complete the "explanation" section in part 7 of Form 843.

3. Attach verification to support your claim. If you were unable to pay your tax because of illness, attach a letter from your doctor or hospital. If the IRS approves the abatement it will refund late payment penalties which you've already paid, and remove late payment penalty fees from your IRS tax bill.

4. Write the IRS a detailed letter explaining the situation or circumstance which caused your late payment. The IRS caseworker who handles your file will determine whether or not your particular circumstance meets the requirement for abatement as required by IRS guidelines. You will receive a follow-up letter in the mail either confirming or denying your request for removal of the penalty.

Tips & Warnings

• Penalties accrue each month on unpaid tax. This means that if you are granted an abatement but have not paid your tax in full, the penalties will begin to accrue again the following month if the tax is unpaid. For this reason, it is usually best to request an abatement only after you've paid the tax you owe in full.

References

• Internal Revenue Service: Avoiding Penalties and the Tax Gap
• Internal Revenue Service: Nine Things You Should Know About Penalties
• Internal Revenue Service: Contact My Local Office

Resources

• IRS Form 843