The IRS assesses many types of penalties against tax payers for various tax non compliance issues. These penalties can be very costly to tax payers. For example, Failure to File Penalties can be assessed at 5% of unpaid tax and accrues 5% for each month until they reach a maximum of 25%. IRS also assesses other penalties such as Failure to Pay, Failure to Deposit, Trust Fund Recovery Penalty (which can also be assessed against any of responsible individuals personally at 100% of what should have been paid).
So, if this has happened to you or your business, what can you do? Well, luckily you may have the option of requesting an abatement. If you owe penalties for Failure to File, Failure to Pay or Failure to Deposit, you may qualify for a first time penalty abatement if you meet certain requirements. If this isn't an option, it is possible you may qualify for a tax abatement for reasonable cause. For example, if the failure to file or pay or deposit was as a result of the death or serious illness of the responsible individual, you may have "reasonable cause" to obtain an abatement. There are other reasons you can offer to IRS in support of your request for an abatement, which are also dependant on your circumstances.
If it turns out an abatement is not possible in your case, you may have the option of using Chapter 13 Bankruptcy to deal with your personal liability for these penalties. In Chapter 13, penalties can be discharged if certain criteria are met without having to be paid in full, including penalties on underlying taxes such as trust fund taxes which are not dischargeable. You can also use Chapter 13 as a way to deal with tax debts that are not dischargeable and repay them over up to 60 months.
If you want to learn more about tax penalty abatement or Chapter 13 bankruptcy as a way to reduce and deal with your tax liabilities, give my office a call today at (914) 752-5098 to schedule your free consultation.