Penalties and Possible Penalty Abatements
There are several different penalties that may be affecting your ability to pay back your IRS balance. Often times there are ways to address the penalties.
Failure to file penalty-
As the name implies, this penalty is assessed when a return is not timely filed, either by April 15, or October 15 if an extension is granted. The penalty amount is 5% per month up to a maximum of 25%. It is important to note that filing for an extension to file is NOT the same as extension to pay. Taxes are still due by April 15 for individuals and most businesses.
Failure to pay penalty-
As the name also implies, this penalty, with the same 5% monthly capped at 25% parameters, is assessed when taxes due are late. Again, the due date in most cases is April 15.
Trust Fund Penalty (941 Payroll Taxes)-
The most common business penalty, this penalty is assessed when a business fails to pay payroll taxes. Although considered a “penalty,” the name can be quite deceiving. It is an additional assessment to the owner of the business responsible for handling payroll taxes and payments. IF the business is unable to pay the payroll taxes fully, the individual may become liable for a portion of the payroll taxes, even if the business is a corporation or other shielding entity.
The assessment can be fought at the source by challenging the responsibility of the owner. If this is not possible, we can negotiate to keep the payroll obligation as the responsibility of the business and not the individual, so as to avoid personal involuntary collection (liens and levies). Finally, in some situation, we can utilize the offer in compromise program and include the liability assessed to the individuals to try to shield from personal involuntary collection and even reduce liability owed dramatically.
Fraud Penalties-
The most serious and consequential penalties, our attorneys fight the fraudulent assessment, whether at the audit/assessment level or after the assessment itself via Office of Appeals or Tax Court petitions.
