Back Taxes: Getting Relief from Penalties

Last updated on October 3, 2023

When seeking relief from back taxes, it’s important to consider the penalties that the IRS charges on unpaid balances. The penalty starts at 0.5 percent and reaches a maximum of 25 percent. Tax debt amount increases every month because the IRS charges penalties on the total amount due; this, combined with monthly interest, rapidly increases the liability.

Reprieve from penalties will only be considered if the taxpayer has a reasonable cause for not filing on time. The reasonable cause must be something that was beyond the control of the taxpayer, such as a natural disaster, theft, divorce, illness, etc. If the IRS accepts the reason for the non-compliance, then they may reduce the penalty or possibly remove it altogether.

When resolving a tax debt, individuals should attempt penalty abatement if they couldn’t pay their taxes on time as a result of something that was beyond their control. Penalties increase a tax debt each month, so resolving the liability early on is in the taxpayer’s best interest. Penalty abatement may reduce back taxes even if the individual doesn’t qualify for a debt reduction plan.