IRS Penalties and How to Avoid Them

Last updated on November 19, 2022

There are various penalties that the IRS charges for the different kinds of tax non-compliance. The amount of penalties charged largely depends on the severity of the non-compliance. But taxpayers can avoid paying penalties in certain cases. To induce the IRS to forgive a penalty or reduce its amount, taxpayers need to convince the IRS that the non-compliance happened not intentionally, but because of unavoidable circumstances that were beyond their control.

Apart from qualifying for abatement of penalty, taxpayers can also receive relief from penalty if they are struck by natural disasters and are not able to comply with certain tax rules such as filing of taxes. For these special cases, the IRS shares information about abatement of penalty on their website.

Usually, if an area is hit by a storm, the IRS will declare abatement of certain penalties for the residents of that area. One recent example of this is the IRS’s waiving failure to deposit penalties on certain tax deadlines for those affected by severe storms and flooding in Colorado last September. Taxpayers can contact the IRS to determine the extent of tax relief provided or visit their website for more information.

IRS penalties can be substantial in cases of tax debt that have stayed unresolved for years. This happens because the penalties are charged monthly and continue to accumulate over the years. Even though taxpayers should always seek to resolve their tax debt at the earliest possible time, they may try for reduction or forgiveness of penalty when working to resolve their tax debt.