Tax Penalty Abatement: 7 Common Myths

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Have you received an IRS tax notice indicating that you need to pay back tax debts? If so, you obviously want to resolve your matter carefully, quickly and ethically. Unfortunately, when it comes to sidestepping IRS penalties and obtaining tax relief, Coloradans often engage in dubious or even outright illegal or counterproductive behavior, because they’re caught in the thrall of numerous myths. Let’s explore some of these regarding a tax penalty abatement, so you don’t make costly, annoying mistakes:

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Myth #1 – The IRS Cannot Waive Penalties

A First Time Tax Penalty Abatement waiver offers taxpayers relief if they have had no penalties of a substantial amount in the last three years. This program applies to taxpayers who have failed to file, pay or deposit penalties. The IRS only looks at the last three years when granting a First Time Abatement. Although qualifying for this program is difficult, if you can prove that you meet the guidelines, an agent can override the system. Seek qualified professional help if you think that you might be eligible for this program.

Myth #2 – The IRS Will Not Accept Any Reason for Failing to File

The IRS allows “reasonable cause” as a valid reason for failure to file your taxes, and it will grant a tax penalty abatement for failure to file or deposit under the following conditions:

  • Death, severe illness or unavoidably detained
  • Natural disaster, accident or fire
  • Inability to obtain the needed records for reasons beyond your control or
  • Ignorance of the law despite reasonable attempts.

Myth #3 – You Have No Options If the IRS Files a Substitute Return

If a person does not file taxes for years, the IRS will eventually file a substitute return on his or her behalf. Even when the agency does so, you can still seek  a tax penalty abatement. In addition, you can also submit the correct forms for the missing years.

Myth #4 – The IRS Never Admits Mistakes

The IRS might incorrectly assess your tax, showing that you owe more than you do. If you can demonstrate that the IRS made a mistake, the agency will remove the related penalties.

Myth #5 – The IRS Decides Whom to Audit by When People File Their Taxes

The IRS flags certain tax returns according to significant business losses and questionable deductions. The agency will be more likely to audit you if your deductions exceed your earnings.

Myth #6 – If You Can’t Afford to Pay the IRS, You Can Just File an Extension

A tax extension does nothing to reduce your IRS penalties, nor will the IRS give you a tax penalty abatement; it just gives you longer to file. However, you should file and pay your taxes on time. Doing so will save you late filing fees of 25 percent.

Myth #7 – You Will Need to Hire a Big Firm or Tax Attorney to Obtain Relief

A qualified Denver based IRS tax resolution expert can save you substantial money and possibly file for a tax penalty abatement. Do not risk trying to resolve the problem on your own. Call our team at 720-398-6088 for a free consultation.