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TAX NEWS - 2010

Reducing Back Taxes Owed Through Penalty Abatement

If you do not pay your taxes owed on time then you will be charged with penalties and interest. Even though the interest rate is not that high, the amount payable as tax will increase day by day. Ultimately a situation will be reached such that the amount payable as tax will be very large and you couldn't pay that much amount. In a situation where you have a legitimate reason for late payment of taxes or unpaid taxes, you can make use of the penalty abatement for getting tax relief. With the help of penalty abatement, you will be either forgiven for the full tax penalty amount or a part of the tax amount. In certain cases, IRS removes the full charges made on the person and he/she will be completely free from the penalty.

In order to get the benefits of penalty abatement the taxpayer must produce the necessary documents to convince the IRS that there is a legitimate reason why you should not be held liable for the penalties owed. You will receive tax relief only if the IRS is convinced with the documents produced. The reason or reasons provided must be genuine. The decision will be made by the IRS according to their guidelines. Penalty abatement can be the best form of tax relief for individuals to eliminate penalties that have added up to a significant amount. In certain situations, IRS has even returned the payment made by the taxpayer as tax. It also gives a chance for a taxpayer to decrease the amount of interest to be paid as tax.

Penalty abatement can be applied for in three ways. It can be done through written, verbal or Form 843. But you must have a strong reason supported by valuable proofs to get tax relief through this method. The situations under which you can apply for penalty abatement includes natural disaster, long term unemployment, serious health problems, misplaced financial records, mistake from the side of IRS, death in the family, or any other reason that would have prevented you from filing or not paying the taxes owed.
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