IRS Penalties: What Triggers Them and How to Fight Back

Receiving notice of a tax penalty from the Internal Revenue Service (IRS) can be unsettling, especially if you don’t understand the reason behind it. While the IRS issues penalties to encourage timely and accurate tax filings, many taxpayers feel blindsided or overwhelmed by the amount they owe.

Fortunately, not every penalty is set in stone. Our Florida tax-IRS attorney has over 50 years of experience as a CPA and former FBI Special Agent handling complex tax matters. We explain what triggers tax penalties and how to fight back.

Common Types of IRS Penalties And Why They Occur

The IRS issues as many as 40 million penalty notices each year, generally for what the agency perceives as taxpayer errors or delays. If left unaddressed, these penalties can snowball quickly with added interest. The following are some of the most common tax penalties and what can trigger them:

• Failure to file: Not submitting your return by the filing deadlines can result in a five percent monthly fee on the tax due.
• Failure to pay: Owing taxes and not paying on time adds a monthly penalty of 0.5 percent on the unpaid amount.
• Accuracy-related penalties: If you underreport income or claim credits you are not entitled to, the IRS may tack on penalties that equal up to 20 percent of the underpayment.
• Estimated tax penalties: If you’re self-employed or receive untaxed income and fail to make quarterly payments, you could face interest-based penalties.
• Fraud penalties: For willful evasion or fraudulent reporting, the penalty is 75 percent of the unpaid tax, plus possible criminal investigation.

Can You Fight IRS Penalties? Yes, And Here’s How

The IRS offers several avenues to reduce or remove penalties, especially when demonstrating reasonable cause. An experienced Florida IRS attorney can review your case and recommend the best defense. Strategies to reduce or eliminate IRS penalties include:

• First-Time Penalty Abatement: Available if you’ve been compliant for the past three years and this is your first issue.
• Reasonable Cause Relief: If illness, natural disaster, or another serious circumstance delayed your filing or payment.
• Statutory Exceptions: For those given incorrect written advice by the IRS or facing a documented systemic error.
• Audit Reconsideration: If a penalty stems from a previous audit, it’s possible to reopen and challenge the findings.

With the right legal representation, you may also be able to negotiate penalty removal while setting up an IRS installment agreement or submitting an Offer in Compromise.

For Trusted Legal Help In Resolving IRS Penalties, Contact Our Experienced Florida Tax-IRS Attorney

Receiving a notice from the IRS regarding potential penalties can be overwhelming. Fortunately, there are legal options that can challenge these penalties outright or reduce what you owe.

At Ronald Cutler, P.A., we understand the complexity of IRS procedures and how intimidating tax notices can be. Our office provides trusted legal help and has helped countless clients resolve IRS issues quickly and confidently. Call or contact us online today to schedule a consultation with our experienced Florida IRS attorney.

Sources:

irs.gov/payments/penalties

irs.gov/statistics/collections-activities-penalties-and-appeals