| Going Broke: IRS fines are expensive. Penalties were | | | | Qualifications (Reasonable Cause for Not Paying |
| originally meant to punish taxpayers if they didn't follow | | | | Penalties): |
| the rules. Now they're a regular source of income for | | | | Serious illness of you or a family member. |
| the IRS. Don't let the IRS extort you. Know your | | | | Unavoidable absence |
| enemy and prevent penalties from bleeding you dry. | | | | Business Records destroyed (by fire or other cause) |
| The Penalty Box: | | | | Being unable to determine amount due for reasons |
| Accuracy Penalties: The IRS can add a 20% penalty if | | | | beyond your control |
| they find you understated your income tax liability. | | | | Taxpayer's ability to make deposits or payments |
| Fraud Penalties: If you fraudulently underreport your | | | | impaired by civil disturbances |
| income the penalty is 75% of the amount you | | | | Lack of funds applies. But only when you can prove |
| underreported. You can also be slapped with the 75% | | | | lack of funds occurred despite exercising ordinary |
| penalty if you fail to file your tax returns. | | | | business prudence. |
| Failure to Pay Taxes Penalties: This penalty starts on | | | | Other explanations may be acceptable...but you have |
| April 16 for the unpaid amount. It can be as high as 1% | | | | to prove you exercised ordinary business care and |
| per month on the balance due. | | | | prudence but still could not pay. |
| Late Filing of Return Penalties: Did you file your return | | | | Fight Back: How to request penalty abatement. |
| late? The IRS can impose a penalty of 5% per month | | | | Fill out IRS form 843, "Claim for Refund or Request for |
| based on the the tax balance due, up to 25% total. | | | | Abatement." |
| Combined Penalties: Did you both file and pay late? | | | | Include copies of documents that prove your case |
| The IRS can impose a combined penalty of 5% per | | | | Make copies of any letter you send to the IRS. |
| month for up to 5 months. | | | | Warning: Winning the Penalty Abatement game will be |
| Stop the Bleeding: Penalties will grow unless you stop | | | | tough. You have to make sure you provide plenty of |
| them. If you apply for Penalty Abatement you can | | | | documentation to prove your case. Double check for |
| stop the penalties and reduce your debt by thousands | | | | errors! One small error and your request could be |
| of dollars. But first, you have to qualify. | | | | denied. |