When you’re having tax problems, IRS penalties just add to your stress and anxiety. You’re already behind on your tax filings or payments—now you owe the IRS even more money because of penalties.
Once penalties are assessed, they tend to keep adding up unless you do something to fix the problem. Use the following strategies to stop IRS penalties from accruing or reduce the amount of penalties you’ll be charged. If you have existing penalties, find out if you may qualify for penalty abatement.
Request a Filing Extension
The IRS punishes taxpayers who don’t file worse than taxpayers that don’ pay. One simple way to avoid the dreaded failure-to-file penalty is to request a six-month filing extension.
You’ll automatically get the extension when you submit Form 4868. You won’t be charged the failure-to-file penalty if you file by October 15th, but you could still be hit with the failure-to-pay penalty if you owe the IRS money.
File Your Tax Return (Even If You Can’t Pay)
There are many reasons that people file tax returns late or don’t file at all. Failing to file because you don’t want to pay your tax liability is not a good reason. As mentioned above, the failure-to-file penalty is worse than the failure-to-pay penalty, so you should still file if you don’t have the money to pay right now.
There are lots of ways to resolve your tax debt, but there’s no way to avoid your obligation to file a tax return. File on time (or as soon as possible) to reduce your IRS penalties, then contact a tax attorney if you need help with your tax debt.
Adjust Your Withholdings or Estimated Tax Payments
In our pay-as-you-go system, you can be charged underpayment penalties if you don’t pay enough taxes throughout the year. If you’re an employee, just increase your withholdings to avoid these penalties.
Business owners or independent contractors will have to adjust their estimated tax payments. There are a few statutory safe harbors to avoid underpayment penalties. The simplest one is to pay at least as much in estimated tax payments this year as your total tax liability from last year.
This will keep you safe from underpayment penalties, but be aware that if you earned more this year than you did last year, you could still end up owing taxes when you file your return.
The Gartzman Law Firm offers delinquent tax return preparation and tax settlement help for both federal and state tax debt. Use our contact form to request a consultation with an Atlanta tax resolution attorney.