If you filed your tax return or paid your taxes late, the IRS may have assessed one or more penalties on your account. In some cases, the IRS will waive the penalties for filing and paying late. However, you’ll need to ask the IRS to do this. The IRS will usually consider the following:
- Reasonable Cause – You have a reason for not filing or paying on time such as:
- You exercised ordinary business care and prudence to determine your taxes.
- You had matters beyond your control that left you unable to file or to determine the amount of deposit or tax due.
- You didn’t receive necessary financial information.
- You didn’t know you needed to file a tax return even though you made efforts to find out.
- You had a death in your immediate family.
- You or a member of your immediate family suffered a serious illness that kept you from handling your financial matters.
- You lost your tax documents in a fire or some other disaster.
- First-Time Penalty Abatement – You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, or deposit taxes when due, under the IRS’s First-Time Penalty Abatement policy if the following are true:
- You didn’t previously have to file a tax return or you have no penalties (except the estimated tax penalty) for the three tax years prior to the tax year in which you received a penalty.
- You filed all required tax returns or filed a valid extension of time to file.
- You paid, or have arranged to pay, any tax due.
This list doesn’t include all possible reasons. Be prepared to explain to the IRS what issues you faced and why they caused you to file your tax return or pay your taxes late. You should also be prepared to show the IRS you’ve corrected the situation, and you won’t have problems filing and paying on time in the future.
Did you file a tax return with your spouse and all or part of your refund was applied to a debt only your spouse owes?
You’re an injured spouse if you filed a joint income tax return and all or part of your share of the joint refund was (or will be) applied against a legally enforceable past due debt. The IRS applied all or part of taxpayer’s refund to pay another tax debt. that belongs just to your spouse. The past due amount can be a federal debt, state income tax debt, state unemployment compensation debt, or child or spousal support payments.
As an injured spouse, you can request your part of the tax refund by filing Form 8379, Injured Spouse Allocation, using the instructions for this form.
Do you owe tax because your spouse didn’t report deductions or didn’t include income on your joint tax return?
When you file a joint tax return, you and your spouse are each individually responsible for the tax, penalties, and interest that arise even if you later divorce. Under certain circumstances, you may not have to pay the amount owed to the IRS.
If you and your spouse or former spouse owe a balance because he or she improperly reported deductions or didn’t report income, then you may request relief from all or part of the liability.
You may qualify for innocent spouse relief from the joint balance if you didn’t know or have reason to know of the improper reporting or omission; you’re divorced, separated, or no longer living together; or it wouldn’t be fair to hold you responsible for the tax under the circumstances. To request Innocent Spouse Relief, file Form 8857, Request for Innocent Spouse Relief, using the instructions for this form.
Did the IRS audit (examine) your tax return?
If the tax you owe is because of an audit you didn’t know about or weren’t able to provide any information for, you might be able to ask the IRS to take another look at your records through the audit reconsideration Process used by the IRS when the taxpayer disagrees with the results of an audit of a tax return; taxpayers can request an audit reconsideration when the balance due from the audit remains unpaid. process.
Did the person who prepared your tax return change your tax return information without your permission?
The first indication that you’re a victim of a dishonest preparer. An individual hired by taxpayers to prepare and sometimes file their taxes. might be correspondence from the IRS. For example: An IRS notice may alert you to a mistake on your tax return or that it’s being audited. Another way you might find out is if a transcript of your account doesn’t match the tax return you signed.
If you’re the victim of return preparer fraud or misconduct, you’ll need to demonstrate it to the IRS by following certain steps found within the return preparer fraud information.
Are you financially unable to make any payment at this time?
There are times where you agree with the IRS that you owe taxes, but you can’t pay due to your current financial situation. If the IRS agrees that you can’t pay both your taxes and your reasonable basic living expenses, it may place your account in Currently Not Collectible(CNC) hardship status.
If the IRS agrees to place your balance due accounts in this status, it doesn’t mean the balance goes away. It simply means the IRS won’t pursue collection actions while your account is in this status. Unfortunately, penalties and interest continue to accrue by law. If paying anything to the IRS, even the smallest amount, will make you unable to pay your reasonable basic living expenses, talk to the IRS about placing your accounts in this status. The IRS will ask you about your income and expenses so be prepared to have a discussion with them about how much money you earn or get each month compared to how much you spend.
Would you like the IRS to consider accepting only part of what you owe?
An Offer in Compromise(OIC) is an agreement between you and the IRS, where the IRS agrees to accept less than the full amount you owe. There are two main reasons the IRS may agree to accept less than the full amount you owe:
- Doubt as to Collectability: This means you don’t have enough income or assets to pay your debt in full. If the amount owed is correct, but you can’t afford to pay all of it, you can prepare and file an offer using the Form 656B, Offer in Compromise Booklet.
- Effective Tax Administration: You can pay your full debt, but it would create an economic hardship, or would be unfair or inequitable.
- Doubt as to liability: You don’t believe you owe the tax, or you don’t believe the amount owed is correct. You can submit Form 656-L, Offer in Compromise (Doubt as to Liability).
Would you like to make payment arrangements?
It’s in your best interest to pay your tax debt as soon as possible because paying can limit the penalties and interest the IRS may charge.
However, if you currently can’t pay your taxes in full, the IRS offers a number of payment options. Depending on the type of tax you owe, and how much, different options are available, ranging from short term extensions, to installment agreements, to an offer in compromise. Each has different requirements and fees.
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