Unpaid taxes can accumulate to tens of thousands of dollars sometimes hundreds of thousands of dollars over the years. On top of that, the IRS imposes interest and penalties on unpaid taxes that can add substantial amounts to your tax debt over time. While the unpaid tax debt stays the same the penalties and interest continue to accumulate until paid.
Abatement means to reduce or eliminate something. Penalty Abatement means the reduction or elimination of the penalty portion of your tax debt. Although reduction of interest can happen it is not that common for the IRS to do so.
To qualify for First Time Penalty Abatement there are 3 basic criteria:
- You did not incur any penalties for the three previous tax years.
- You filed all required returns and extensions. If you are not current and compliant you will not qualify.
- You have made arrangements for any outstanding tax debt.
To qualify for penalty abatement over many years of back taxes there must be reasonable cause for filing your taxes or paying them late.
Examples of Reasonable Cause
- Your records were destroyed by natural disaster, flood, fire etc
- Unable to calculate the back taxes due to missing records
- You were in Prison or Rehab
- Family Death
- You got bad information from a Tax Professional
- You got bad advice from an IRS Representative
Because reasonable causes can vary tremendously qualifying for Penalty Abatement is taken on a case by case basis. Your case will be looked at by an IRS Representative, not a computer. The most important issue is whether the situation was out of your control or not.
If interest and penalties continue to accumulate increasing your tax debt it is time to get some professional help. Millennia Tax Relief has years of experience helping taxpayers resolve, reduce or eliminate their outstanding tax liabilities. Give us a call for an initial consultation and find out what your best options are.