IRS and OTC Penalties and Interest
Most times it's not the back taxes that are the real problem, it's the penalties and interest that accrue. These become a serious problem for many people facing tax debts. Compounding over a period of time, these penalties and interest can create a extremely high tax debt - sometimes even larger than the original tax owed!
The problem for many people is they wait too long or try to wish it away. It only gets worse. The best thing to do is to get an experienced tax attorney's assistance.
Reasons for IRS Penalties & Interest
People may face paying IRS penalties and interest due to:
- Underpaying: The IRS has ways of determining who may have paid less than they were supposed to; in their eyes, this is an inexcusable offense and the penalties can be significant - maybe as high as 20% interest.
- Filing a Late Return: There's a good reason why we have the fixed date of April 15 for filing of returns. If we didn't, many more people would be paying late. Even a one day delay could trigger the IRS penalty for late filing. You could be responsible for 5% to 25% interest levied as a penalty.
- Hiding Gift Taxes: Many people aren't aware that monetary gifts need to be taxed. You definitely need to declare these when filing your return. If you do not, you could face a penalty of between 20% to 35%.
- Tax Fraud: Any kind of purposeful tax deception can mean a penalty of up to 75%, not to mention federal criminal charges.
Most of these penalties and interest situations happen due to errors in filing returns and the failure to make the actual tax payments.
Potential consequences of not paying taxes, penalties, and interest include:
- Wage Garnishment
- Property Levies
- Seizure of Assets
- Criminal charges / jail time
When requesting a penalty abatement, the taxpayer needs to be able to explain why the penalty should be removed. [NOTE: By federal law, interest is NOT abatable
except in very rare circumstances. Our office can explain in more detail.]
If there were circumstances beyond your control that prevented you from paying your tax debt and led to delinquency, we are able to challenge the penalties that have built up. This is called Penalty Abatement. Penalty Abatements fall into four separate categories. They are:
Reasonable Cause - mistake made by the taxpayer, ignorance of law, death, serious illness, or unavoidable absence.
Correction of Service Error - mistakes made by the IRS.
Administrative Waivers - undue hardship, fire, flood, natural disaster, bad tax advice from the IRS
Statutory Exceptions - simple or complex legislative tax code changes.
If an Offer in Compromise is not the best solution, then a Penalty Abatement may be an alternative for you to eliminate part or all of your tax debt depending upon your circumstances.
Tax attorney Sherri Carver has the knowledge and the experience necessary to assist you with your Penalties and Interest problems. Dealing with tax problems can be one of the most stressful times of anyone's life;
Don't handle it alone! You need a tax attorney who understands tax law and how to help you end your tax problems.
Contact Our Office
today for a consultation regarding your tax problems!