Tax penalties may be negotiated, reduced, or even totally eliminated in some cases. There are a number of IRS programs that can be used when you have significant tax penalties and want some kind of relief.
Reasonable Cause Penalty Relief
If you missed a tax filing or tax payment deadline due to circumstances beyond your control, you may be eligible for penalty relief due to reasonable cause. You will need to give the IRS details about exactly what happened and how it directly caused you to pay or file your taxes late.
Natural disasters, fires, death of an immediate family member, or a serious illness may all qualify for this type of relief. However, a lack of funds is not a reason the IRS will accept on its own.
First-Time Penalty Abatement
First-time penalty abatement (FTA) can be used if you don’t have any tax penalties in the three years prior to the year in question. You must also be up-to-date on your tax filings and have either paid or arranged to pay (i.e. agreed to a payment plan) your taxes.
Many taxpayers who are eligible do not seek FTA because they are unaware it exists. If you have a large outstanding tax liability, you could save hundreds or possibly thousands in penalties if FTA is granted.
FBAR Penalties
Foreign Bank Account Report (FBAR) penalties are assessed when a taxpayer that should have filed an FBAR fails to do so. Non-willful FBAR penalties are $10,000 per violation, while willful violations can result in penalties of $100,000 or 50% of the highest account balance.
It is possible to have these penalties reduced in some cases. The IRS examiner handling your case has the discretion to consider several factors when determining your penalty assessment:
- Whether to assess a separate penalty for each year or only one penalty
- Whether to assess willful or non-willful penalties
- Use of the mitigation guidelines for reduced penalties
If you are using the New Offshore Disclosure Program, you should be aware of how the FBAR penalties are calculated. A tax attorney can help you negotiate the FBAR penalties and argue for a lower penalty assessment.
The Gartzman Law Firm can help you with tax penalties and other IRS tax problems. Use our contact form to request a consultation with an Atlanta tax resolution attorney.