The IRS penalizes millions of taxpayers each year. There is a penalty for just about anything. The most common penalties are assessed for failures to file a tax return, failure to pay a tax owed, and underpayment of taxes. These and many other penalties can substantially increase the amount you owe in a very short period of time. To make matters worse the IRS charges you interest on penalties.
Penalties can be as high as 75% to 100% of the original taxes owed. Oftentimes, a taxpayer has enough money to pay the tax owed but cannot pay the liability in full because there is a large amount of accrued penalties and interest.
Relief from, or abatement of, penalties is possible. A taxpayer must demonstrate that the circumstances giving rise to the penalty were due to “reasonable cause” and not “willful neglect” of the taxpayer. Careful presentation of the facts and circumstances surrounding the cause for the penalty is essential to obtaining relief.