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Reduce or Eliminate Tax Penalties and Interest

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End Penalties and Interest

Tax penalties can generally be assessed against you based on your failure to file a return, failure to pay taxes when due or failure to pay estimated taxes during the tax year. Tax penalties can significantly increase your outstanding tax liability and make paying off the debt far more difficult. In addition to penalties, interest on unpaid taxes will accrue from the original due date until the taxes are paid to the IRS.

1. How Are Tax Penalties Assessed?

The amount of the tax penalties depends on the event that triggers them. The failure to timely file a return is governed by Internal Revenue Code § 6651(a)(1). That statute states that a penalty equal to 5% of your unpaid tax bill will be imposed each month. Thus, left unpaid, the original amount of the tax debt will escalate rapidly.

Failure to pay tax reported on a timely filed return is governed by Internal Revenue Code § 6651(a)(2). If you do not pay your taxes on time you will owe an additional 0.5% of the outstanding tax debt each month. As you can see, the IRS treats the failure to file a return more harshly than the failure to pay. The failure to pay estimated taxes is governed by Code § 6654, which provides that the taxpayer is subject to the underpayment rate under Code § 6621.

2. How is Tax Interest Assessed?

As mentioned above, interest will accrue from the original due date of the return until the date the taxes are paid. The rate is the same as the rate for failing to pay estimated taxes. The rate fluctuates but currently stands at 6%.

3. How Do I Eliminate Tax Penalties and Tax Interest?

The easiest way to reduce tax penalties and interest is to reduce the amount of tax that you owe. Since both penalties and interest are a function of the outstanding debt, it follows that if there were errors on your return (i.e., failure to claim credits and deductions) there will be less penalties and interest assessed. There are several options for penalty abatements. These include administrative waivers, attributable IRS error, certain legal exceptions and what is known as reasonable cause (an appeal to the IRS to consider your unique circumstances).

In addition, installment payments and lump sum tax settlements are effective options to eliminate tax penalties and interest. Tax Relief Network can assist you in evaluating the facts of your case to determine the best strategies for reducing or eliminating tax penalties and tax interest. Please contact us today for a free consultation.

4. The Taxpayer Roadmap

This illustration of the modern US tax system at a very high level view shows the processes to get answers to your questions from filing to litigation. This illustration provided by the tax payers advocate service shows the complexity of the stages required to get answers to solve your tax issues. If you would like some help navigating through this process we are the experts you need to have on your side! Please contact us at 800-TAX-4200 to speak with one of our team specialist for a no cost or obligation review.

End Penalties and Interest

Tax penalties can generally be assessed against you based on your failure to file a return, failure to pay taxes when due or failure to pay estimated taxes during the tax year. Tax penalties can significantly increase your outstanding tax liability and make paying off the debt far more difficult. In addition to penalties, interest on unpaid taxes will accrue from the original due date until the taxes are paid to the IRS.

1. How Are Tax Penalties Assessed?

The amount of the tax penalties depends on the event that triggers them. The failure to timely file a return is governed by Internal Revenue Code § 6651(a)(1). That statute states that a penalty equal to 5% of your unpaid tax bill will be imposed each month. Thus, left unpaid, the original amount of the tax debt will escalate rapidly.

Failure to pay tax reported on a timely filed return is governed by Internal Revenue Code § 6651(a)(2). If you do not pay your taxes on time you will owe an additional 0.5% of the outstanding tax debt each month. As you can see, the IRS treats the failure to file a return more harshly than the failure to pay. The failure to pay estimated taxes is governed by Code § 6654, which provides that the taxpayer is subject to the underpayment rate under Code § 6621.

2. How is Tax Interest Assessed?
As mentioned above, interest will accrue from the original due date of the return until the date the taxes are paid. The rate is the same as the rate for failing to pay estimated taxes. The rate fluctuates but currently stands at 6%.
3. How Do I Eliminate Tax Penalties and Tax Interest?

The easiest way to reduce tax penalties and interest is to reduce the amount of tax that you owe. Since both penalties and interest are a function of the outstanding debt, it follows that if there were errors on your return (i.e., failure to claim credits and deductions) there will be less penalties and interest assessed. There are several options for penalty abatements. These include administrative waivers, attributable IRS error, certain legal exceptions and what is known as reasonable cause (an appeal to the IRS to consider your unique circumstances).

In addition, installment payments and lump sum tax settlements are effective options to eliminate tax penalties and interest. Tax Relief Network can assist you in evaluating the facts of your case to determine the best strategies for reducing or eliminating tax penalties and tax interest. Please contact us today for a free consultation.

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