If you ignore your taxes when they are due, they will not go away. Instead, they might keep growing as interest and additional penalties accumulate. The IRS will keep trying to collect the tax that you owe, but it may be willing to reduce or waive the penalty if you have a good reason for falling behind on your payments.
Here are some things that you should try if you find yourself dealing with IRS problems:
Look into abatement
Could your circumstances entitle you to abatement? The IRS might waive the penalties if your reasons for not paying were outside your control: imprisonment, death in the family, destruction of your records, or a hurricane. If your reason for not paying is insufficient funds, your penalties will not be waived because you are expected to set aside some money for taxes.
On the other hand, if you have been unemployed, your penalties might be waived.
You need to find proof to back up your claims before approaching the IRS. If you reside in a federally declared disaster area that the IRS is offering penalty waivers for, you need to gather some proof to show that you are a resident of that area. Were you in the hospital at that time?
Your medical bills will be very helpful. Without any proof, the IRS will not consider reducing or waiving your penalties.
Make a waiver request
You should write a letter to the IRS asking for a penalty waiver. In it, state the reason why you were not able to pay and give copies of the documents that you are presenting as evidence. Mail your letter to the IRS address that sent the penalty charges. If you like, you can speak to a representative over the phone.
Try again if you do not succeed
If the IRS refuses your request, you should appeal. They will respond after ninety days of receiving your request. Are you still unsatisfied with their response? You can write back with additional information and ask them to reconsider. You have the right to appeal the IRS decision to impose penalties if your second letter does not solve the problem.
You will now meet with an impartial appeal officer that will look at your circumstances and facts for reconsideration. Do you run a small business and the employee who used to file tax returns and make payments quit? This is a good reason to get a penalty waiver if it happened close to the penalty deadline.
In other cases, relying on an accountant’s advice – which was wrong – might not be enough to make the IRS waive your penalties.
If you still have to pay your penalties and the amount is too big to pay at once, you should ask the IRS to allow you to pay in installments. If you would rather spend your time doing productive things, consider hiring experts as Your IRS Problem Solvers to handle your tax issues. Moreover, some problems are too complex to handle on your own.