Tax season can be a stressful time and owing the IRS extra penalties can make it even more difficult. Have no fear! Here at Reliance, our top priority is always to make sure you have all the information you need. We’ll walk you through some of the common penalties that the IRS charges and how you can request relief from these penalties.

Common Penalties the IRS Charges

There are two main ways the government charges penalties for not paying your taxes on time. They are very expensive and add up quickly! These are the penalties you can expect if you haven’t filed and/or haven’t paid:

  • Failure to file (FTF):The IRS charges a penalty for not filing on time of 5% of the unpaid tax for the first 5 months. This penalty maxes out at 25%.
  • Failure to pay (FTP):The IRS charges a penalty for failing to pay your taxes on time.  This penalty ranges from .5% to 1% per month until the taxes are paid.

Relief from Penalties 

Did you know that you can request relief from these penalties? For a FTP penalty, the taxpayer simply needs to request the IRS to abate the penalties (remove the penalties after they are assessed to the taxpayer). Other penalties have different procedures to follow and not all can be abated by the IRS. Some penalties require the taxpayer request an exclusion from the penalty when they are filing taxes.

According to the IRS, there are two reasons to abate these penalties:

  • “Reasonable cause relief (RC):  where the taxpayer can show that they used ordinary care and prudence, but they could not comply (file or pay on time) due to unforeseen circumstances outside of their control (a “reasonable cause” excuse for noncompliance).”
  • “IRS’ first-time penalty abatement relief (FTA):  can be used to abate both the FTF and FTP penalties for a taxpayer in good standing (filed all returns, paid all taxes or in an IRS agreement on the balances owed) with a clean compliance history (no penalties in past three years prior to the penalty year).”

More penalty abatement info here.

We’re Here to Help

At Reliance, we know tax terms can be confusing and the process of paying for extra penalties is stressful.  That’s why we’re here! Call us today at (720)452-2915 or fill out our contact form and we’ll get in touch!

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