Receiving a notice from the IRS that they suspect that you have underreported your income or underpaid your taxes can be a frightening experience. After all, the Internal Revenue Service (IRS) has the authority to garnish your wages or even prosecute you for tax fraud. If you forgot to file your taxes, didn’t pay enough or failed to make a deposit, you could face penalties and fees, as well as still being responsible for the amount you owe.
Don’t panic just because you received a scary-sounding letter from the IRS about your taxes. In some cases, a mistake is responsible for the notice that you received. It is possible for IRS agents to make mistakes when reviewing tax files. You could face accusations related to the actions or inaction of another person with a similar name, birth date or social security number.
However, even if you believe the notice is valid and accurate, that doesn’t mean that you are automatically in a difficult financial position with no options. For some individuals who meet specific requirements, it may be possible to avoid the financial penalties related to certain tax issues.
Can you qualify for the first-time penalty abatement waiver?
The IRS understands that tax laws and paperwork are complex and carry a substantial risk of mistakes or errors. In order to be reasonable, they extend some relief to those who meet specific requirements. Those who have never had a tax issue or who have at least not incurred a penalty in the last three years of tax filings may qualify for the first-time penalty abatement waiver.
It is important that you understand that this waiver is only accessible to those who have not had a previous tax issue with the IRS and that it only applies to the penalty, not the unpaid taxes. The waiver is available both to individuals and businesses. Still, only specific tax issues qualify for the penalty abatement. Only those who failed to file, failed to pay or failed to deposit funds may avoid the penalty associated with that failure.
Explore all of your options when dealing with tax issues
For some people, the mere sight of the IRS’s name on an envelope will be enough to push them into immediate action. Others will take their time and try to determine what caused the issue while potentially also defending themselves.
While you may very well end up paying the taxes requested anyway, it is usually in the best interest of anyone facing enforcement efforts by the IRS to speak with an attorney and possibly even an accountant regarding their tax situation. The more you know about the law and your finances, the better prepared you will be to make decisions and take action.
From filing for a first-time penalty waiver to defending yourself during an audit, there are many benefits to partnering with professionals and taking a proactive approach to resolving the tax issues.