Wednesday, February 25, 2015

Not All Situations of Tax Penalties are Justified

Late payment is one way to incur a tax penalty, and any of the following situations may involve you in such a dispute:

·         Understated taxable income or failure to prove a deduction carries a penalty of 20 percent. If the value is grossly understated, the rate doubles. Performing the aforementioned action with alleged fraudulent intent carries a hefty penalty of 75 percent, with the possibility of charges for tax fraud.
·         Self-employed individuals are more prone to late or inaccurate filing and payment since they have to do everything themselves.
·         Certain circumstances prevent people from timely filing and paying their dues (e.g. overseas duty, sickness, death, destruction of property).

If you find yourself in a similar situation, you need a reasonable voice to speak on your behalf. If you need someone to prove that your shortcomings in filing or paying your dues isn't a product of malicious intent, you need an IRS tax lawyer capable of proving that you deserve abatement.

This isn’t known to many, but it’s possible to request the IRS to eliminate your penalties if you're a first-timer. Known as first-time abatement (FTA), it usually applies to failure-to-file and failure-to-pay cases for a single tax period. However, to qualify for FTA, you must have been faithful to your tax obligations for three straight years.

Tax lawyers normally recommend abatement in case the taxpayer fails to qualify for an offer-in-compromise (OIC), which has a one-in-four chance of qualifying.

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