“I just received a notice from the IRS. They’re saying I owe a big penalty—what do I do?!”
Our checklist outlines steps to consider as you make sense of IRS penalties.
Don’t panic. Navigating IRS penalties is complex, but it’s not an insurmountable task.
Call your tax professional. The right professional can help reduce or remove penalties through the IRS First-Time Penalty Abatement Process or through research, documentation and representation with the IRS.
Understand why you are being assessed a penalty. The IRS typically charges penalties for three main reasons:
If you fail to file
If you fail to pay
If you made an error the IRS believes should not have been made
Next, EXPLORE YOUR OPTIONS…
Look into reasonable cause. Often times, if you provide appropriate supporting documentation for "reasonable cause,” penalties can be reduced or removed entirely.
First Time Abatement. If this is the first time you have been late paying or filing you may be entitled to first time penalty abatement.
Set up a payment plan. If you still owe penalties after exploring the abatement options, you probably won’t be required to pay them all at once. The IRS allows taxpayers to set up a payment plan for amounts owed utilizing an installment agreement. If the total amount of tax and penalty you owe is less than $50,000, you can apply online for an installment agreement. A valid email address and some basic personal and financial information will be required. If you owe more than $50,000, then you may need help applying and completing the supporting documentation. Plus, there are other IRS payment programs that can be used to pay the debt, if you qualify.