IRS One-Time Forgiveness – When Can You Use It?

Are you having trouble with the IRS? It’s a challenging situation to be in. Debt can feel like a large, gloomy cloud following you around – wherever you go. It can damage your credit score, make it difficult to qualify for loans or a home mortgage, and strain relationships. In this article, you will find out if you qualify for the IRS one-time forgiveness and how to apply.

After all, you probably received an IRS penalty because you didn’t have enough money to pay your taxes in the first place. The longer you owe the IRS money, the more interest you will accrue.

Even if you’ve submitted your taxes in good faith, unforeseen events may result in an IRS tax penalty for failing to file or pay your taxes on time. The most common IRS penalties are failure to file a return on time, failure to pay after filing, and failure to pay the estimated amount owed from the previous year.

There seem to be 150 different kinds of IRS penalties. However, the most common examples are the inability to submit taxes on time, the inability to pay after submission, and the inability to pay the estimated money owed from the past year.

What Exactly Is One-Time Forgiveness?

One-time forgiveness also referred to as penalty abatement is an IRS practice that revokes any fines imposed on taxpayers who file a tax return incorrectly or fail to pay on time. A taxpayer should have a solid record of timely and correct tax filing to be eligible for IRS one-time forgiveness.

However, this program isn’t available to someone who has a history of paying late taxes or who has multiple fines pending. It’s for taxpayers who are facing a first-time penalty and have no red flags in their past taxes. So, it’s fair to presume the penalty was imposed in error.

How to Apply?

It’s advisable to consult with a tax professional once it comes to IRS penalty abatement. They are not only educated on penalty abatement criteria, and they’re also prone to have significant experience in preparing penalty abatement requests. One of the more difficult aspects of penalty abatement is that, while there are conditions to meet, there are no strict guidelines regarding who will get it. It’s totally up to the IRS professional with whom you’re communicating in this process.

There are three categories for one-time forgiveness and you need to figure out for which one you qualify.

Category One: Statutory Exception

Relief based on this exemption is only available to taxpayers who have received inaccurate IRS advice. You must have contacted the IRS for guidance, and received a letter in response to your query. And then relied on that advice in a way that resulted in a tax penalty.

It’s critical that the IRS advice you got is related to the penalty notice you got. Your claim will be shaky unless there is a clear link between these two documents.

You must have the supporting evidence in order to assert your claim, as with any type of IRS one-time forgiveness. As a result, it’s essential to save every piece of IRS mail you get.

Category Two: Reasonable Cause

If you don’t qualify for a statutory exception, you can ask the IRS to waive your fees if you have good grounds. Reasonable cause can include the following:

  • A fire, a tragedy, or a natural disaster
  • Inability to provide records
  • Death, serious sickness, disablement, or the taxpayer’s or a part of the taxpayer’s immediate family’s involuntary absence
  • You utilized all of your usual business judgment and care to fulfill your federal tax obligations, yet you were still incapable of doing it.

A lack of money is insufficient to qualify for aid. It’s crucial that you have evidence (with accurate timelines) to back up your claims, such as medical records, court filings, or a note from your doctor confirming that you were unwell or incapacitated.

Category Three: First Time Penalty Abatement

The first-time penalty abatement policy is there for taxpayers who had unpredictable events happen to disrupt their tax situation. If you meet all of the following criteria, the penalty abatement program can decrease or eliminate a penalty—but not your tax liability:

  • You’ve completed and submitted all of your tax returns.
  • You’ve settled your tax debt or worked out an installment plan with the IRS.
  • You haven’t received any fines in the last three years.

In simpler words, this says that if you’ve been in good standing with the IRS and have settled any past disputes, the IRS will be prepared to work with you. So that you can find a solution to this problem.

What About Interests?

Interest may not be remitted even if a penalty is. Some fines may rise weekly and generate interest, increasing your debt from hundreds to thousands of dollars.

The IRS usually begins collecting interest on the day the fine is due. And continue until your debt is paid in full. This is why it’s advisable to deal with any issues that come as a result of a tax return. Before extra interest accrues.

Need Help? We Are Here!

When you fall behind on your business’s books and bookkeeping, it can be even easier to lose sight of your taxes.

That’s where we come in. Our team of bookkeepers can help you keep your books up-to-date, solve any accounting problems, and find deductions that could further reduce your total tax obligations.