Tax Penalty Relief
The IRS and state tax authorities assess numerous penalties of varying amounts. Penalties may be assessed for late filing, late payment, underpayment of estimated taxes, substantial underpayment of tax, and fraud. Penalties may be based on a fixed amount or a percentage of the tax due, be assessed for missing statements or information filings, and result in additional interest due. These penalties apply to both individuals and business taxpayers. For taxpayers with unfiled tax returns or unpaid taxes, IRS penalties can increase rapidly and be substantial relative to the original tax assessment.
Penalties may be reduced or eliminated in some cases, even if you cannot reduce or eliminate your tax debt. The IRS and Michigan tax codes provide safe harbors that may allow taxpayers to avoid or reduce certain penalties. The safe harbor rules are generally calculations that the taxpayer can use to avoid the application of the penalty, and the IRS may not apply the safe harbor rule to determine if the penalty should not apply.
Other penalties may be eliminated based on reasonable cause. Each penalty must be reviewed to determine if a reasonable cause exception is allowed. Reasonable cause may include natural disasters, tax return preparer negligence, and causes outside the taxpayers control. Taxpayers should always consider reasonable cause exceptions if the safe harbor rules do not apply to a penalty.
Additionally, there may be options to re-calculate the penalty based on alternative methods. Using alternative methods to the IRS' calculation, the penalty may differ substantially depending on the type and timing of income earned by a taxpayer during the year. Further, if penalties are reduced or eliminated, the interest related to those penalties is also reduced or eliminated.
If you have received a tax assessment notice that includes penalties, contact Michigan tax attorney Andrew M. Steiger at Steiger Tax Law for a free consultation to review your IRS notice. Based on this review and a review of your IRS tax transcript, he can determine what relief options are available to you. You can receive an up front flat fee for this service and know in advance that you will save money.
Read the Steiger Tax Blog for more information on penalty relief.