First Time Penalty Abatements

Every year, countless taxpayers face penalties due to discrepancies in their tax returns. Taxes can be very complex, especially if you have a business, and, even with the best intentions, mistakes can arise.

A Seattle tax lawyer can help you get the best outcome if you’re facing accuracy related penalties or another serious tax issue. Your lawyer will help you understand the law as well as your best options for possible abatement of IRS penalties.

The good news is that tax law includes something called “penalty abatement,” which provides taxpayers the opportunity to reduce or eliminate certain penalties under specific conditions.

Read on to learn generally about what penalty abatement is and how to apply it when your tax obligation is too high, and you’re struggling to pay a tax penalty on top of your tax liability. Be sure to connect with a Lynnwood legal tax professional at Seattle Legal Services, PLLC for specific help with the details of your tax liability and what to do if in the event of failure to pay penalty fees.

What Is Penalty Abatement?

Penalty abatement is a provision within the federal tax system that allows taxpayers to request relief from specific penalties. This isn’t an automatic process. It requires taxpayers to present a reasonable cause as to why they couldn’t meet their all their tax obligations in a timely manner.

There are specific avenues to pursue if you aren’t able to pay your ordinary tax obligation: tax penalty abatement is specifically about having penalties waived.

The IRS understands that, in certain circumstances, failure to pay tax isn’t a result of willful neglect or disregard for law but instead arises from factors beyond the taxpayer’s control. In these cases, they may be willing to waive certain penalties.

Penalty abatement is this avenue for relief. Provided that a taxpayer can establish a reasonable cause exception for their action or inaction, they can request abatement.

What Are the Penalties for Filing and Paying Taxes Late?

Filing taxes late can result in IRS penalties. The failure to file penalty is calculated based on a percentage of the unpaid taxes owed, usually 5% per month. This penalty accrues for each month or partial month that the tax return remains unfiled, up to a maximum of five months.

Similarly, a failure to pay your taxes can also lead to penalties. The failure to pay penalty is also a percentage of the unpaid tax amount and accrues on a monthly basis. It is usually 0.5% of the outstanding balance per month, up to a maximum of 25%. It’s important to note that the penalties for filing and paying late are separate from the interest charged on the unpaid tax balance, which also accrues until the amount is fully paid.

First Time Penalty Abatement in Seattle

First-time penalty relief is a program offered by the IRS to eligible taxpayers who have a clean compliance history. This program is sometimes casually referred to as one-time forgiveness. Under this program, if a taxpayer has not incurred any significant penalties in the past three years, they may qualify for relief from certain penalties over a single tax period.

When granted, first time penalty abatement allows the taxpayer to have the penalties associated with specific tax filing or payment issues waived. It is important to note that interest charges will still apply to any unpaid tax balance. This relief is a one-time opportunity and provides a chance for taxpayers to rectify their non-compliance without facing the full consequences of penalties.

First-Time Relief and Reasonable Cause for IRS Penalty Abatement

For taxpayers who find themselves facing penalties for the first time, the IRS provides an option known as First-Time Penalty Abatement (FTA).

This relief is available for those who haven’t had any significant tax penalties in the past three years and have never had penalties abated in the past. Not all penalties qualify for FTA, and specific eligibility criteria must be met.

Beyond FTA, there’s reasonable cause penalty abatement, and this is where the concept of “ordinary business care and prudence” comes into play.

If a taxpayer exercised what the IRS defines as ordinary business care and prudence, but still failed to comply due to circumstances beyond their control, they might qualify for penalty abatement based on reasonable cause exceptions.

What Does “Exercised Ordinary Business Care” Mean?

What exactly does “exercising ordinary business care and prudence mean?” It refers to the effort any prudent person would make to meet their tax obligations.

This option acknowledges that events such as serious illness or unavoidable absence can sometimes impede our ability to fulfill responsibilities, despite our best efforts, and that a taxpayer’s failure to pay may be due to circumstances outside their control. It removes the added penalties from the tax bill.

To find out if you’re eligible to have penalties abated, be sure to get tax advice specific to your situation from a Lynnwood tax lawyer.

What Type of Penalties Qualify for Abatement?

When faced with tax penalties, the natural first question for your Seattle tax attorney is: “Can this penalty be abated or reduced?” The short answer is: it depends on the nature of the penalty.

Let’s consider some of the most frequently encountered penalties that may qualify for abatement: but remember that only a lawyer is qualified to look over your tax return and give you specific direction on your particular case.

Failure to File Penalty

Perhaps one of the most common penalties taxpayers face, the failure to file penalty, is imposed when a tax return is not filed by its designated due date.

If you’ve received a penalty for not submitting your tax return on time, there may be hope for relief, especially if you can demonstrate reasonable cause for the delay.

Accuracy Related Penalties

The IRS is keen on ensuring the accuracy of all tax returns. As a result, discrepancies such as underreported income or overstated deductions can lead to accuracy related penalties.

These are not punitive but aim to encourage meticulousness when preparing tax returns. If you can show that an error was a genuine mistake and not willful neglect, there’s a possibility for penalty abatement. Often, if you make a mistake such as underreporting income, the IRS will fix your return and send you a notice about the changes.

While these are some of the most commonly abated penalties, it’s by no means an exhaustive list. Each taxpayer’s situation is unique, and the specific facts and circumstances surrounding their tax obligations and penalties will play a pivotal role in the abatement process.

While it may be tempting to try to navigate this process independently, we always recommend seeking the insights of a seasoned tax professional or tax advisor. Professionals are well-versed in tax laws, regulations, and the intricacies of the IRS’s policies.

They can assess the specifics of your penalty, evaluate the possibility of abatement, and guide you through the appropriate channels to ensure your best possible outcome.

If you find yourself grappling with a tax penalty, remember: knowledge is power, and partnering with a Seattle tax law professional can make all the difference.

Interest on Tax Penalties

Even if a penalty is abated, any interest accrued on that penalty may still be due. The IRS generally charges interest on unpaid taxes and penalties until they’re paid in full. The good news is that interest rates are determined quarterly and are generally lower than many other financial obligations.

Remember, when in doubt, seeking advice from a Lynnwood tax attorney is always a smart move, and you should always file or ask for an extension, even if you’re unable to pay. Late filing of a tax return can lead to additional tax penalties. While reasonable cause relief can be considered in such cases, the implications of late filing are serious.

If circumstances beyond your control, such as a serious illness, unavoidable absence, or other disruptions prevented timely filing, these can constitute grounds for reasonable cause penalty relief.

However, ignorance of the law, in most cases, won’t be sufficient as a reasonable cause defense. Always aim to file tax returns in a timely manner, even if you can’t pay the whole amount on the tax return immediately, and if you have exercised ordinary business care and are unable to pay due to circumstances, document them thoroughly.

Seattle area legal tax professionals can help you apply for tax penalty abatement successfully.

More On First-Time Penalty Abatement

The First-Time Penalty Abatement (FTA) is an administrative relief offered by the IRS to taxpayers who haven’t been assessed specific penalties for the three years prior to the tax year in question. The goal behind FTA is to reward taxpayers who have a history of compliance.

Your eligibility for FTA generally depends on three primary conditions:

Tax Compliance

To be eligible for certain penalty relief, especially First-Time Penalty Abatement, the IRS expects taxpayers to have a good compliance history.

This means that for the three years prior to receiving a penalty, you should have filed all required tax returns, you have not had late payment penalties, and if any tax return obligation has arisen, you have complied with the IRS at every point.

Demonstrating this commitment to compliance not only supports your reasonable cause request but also demonstrates that you’ve always shown good faith in fulfilling your tax obligations.

Clean Penalty History

Another pivotal aspect of a good compliance history is your penalty history. For First-Time Penalty Abatement eligibility, you should have no tax penalties for the three years leading up to the penalty year in question.

This criteria emphasizes the importance of a clean slate, and it’s designed to cater to those who are genuinely facing unexpected challenges: not habitual late filers or payers.

Settling Tax Dues

Before considering your tax penalty abatement, the IRS expects you to address your primary tax obligations. This does not necessarily mean you must have paid off all your unpaid taxes.

If a taxpayer generally has made satisfactory arrangements by setting up a payment plan with the IRS, this indicates willingness and commitment to address tax liability in good faith, and the IRS will likely accept this as it looks at an abatement request and the facts and circumstances surrounding a case.

FTA relief doesn’t require taxpayers to demonstrate reasonable cause, which makes it a bit simpler to request penalty abatement.

However, remember this is a one-time relief, so ensure you’re making the best use of it. If you’ve already used this relief, you won’t be eligible again; but there are other options. Seek professional advice from a Seattle tax lawyer to learn more about your specific situation.

Tax Penalty Abatements – Reasonable Cause Factors

While First-Time Abatement is straightforward administrative relief, reasonable cause relief requires a bit more detail to prove and even more help from a Seattle legal tax professional to ensure you make a successful application.

The IRS evaluates claims on a case-by-case basis, considering various facts and circumstances, and it does not accept ignorance of the law as in itself a valid excuse; but it does recognize that there are some factors out of a taxpayer’s control.

Some recognized reasonable cause factors include:

1. Natural Disasters: Events such as fires, floods, pandemics, or other disturbances can be considered. With large-scale disasters, this is fairly straightforward, but if you were affected by a smaller-scale issue, such as a localized flood or fire, you may need to pull together even more evidence to establish reasonable cause and show good reason for your failure to file or pay.
2. Serious Illness or Death: An unexpected illness or death in the taxpayer’s immediate family can constitute reasonable grounds for abatement of IRS penalties. You’ll need to gather documentation to prove the illness or family death in order to avoid having to pay penalties.
3. Erroneous Advice from the IRS: If you received incorrect written advice from the IRS, this can be a reason to request penalty abatement. Make sure to save all documentation and talk to a legal tax advisor to ensure you can prove you were given inaccurate advice.
4. Ignorance of the Law: This factor is typically weighed alongside other reasons for tax penalty abatement. As stated, ignorance of the law alone doesn’t constitute reasonable sufficient cause, but it can support other reasons based on your unique facts and circumstances.
5. Exercised Ordinary Business Care and Prudence: As previously mentioned, if a taxpayer has shown good faith and ordinary business care and prudence, but still faced difficulties meeting tax obligations or financial hardship of some kind, it may be possible to get a tax penalty abatement.

For successful penalty abatement based on reasonable cause, you must provide detailed, clear, and concrete evidence showcasing that you acted in good faith and showed ordinary business care and prudence, but that circumstances beyond your control led to an oversight or inability to meet your tax obligation.

A Seattle tax attorney will be your best tax adviser here, helping you get all your tax forms in order and presenting your evidence in the best possible light, showing your good faith effort to deal with your tax problem.

How Can I Access Penalty Abatement?

If you have reasonable cause for your failure to pay or file, you can request abatement. To get started, promptly file any delinquent tax returns to bring your tax compliance up to date. Next, you would draft a formal letter to the IRS explaining the circumstances that led to the late filing or payment, demonstrating reasonable cause. The letter should include supporting documentation, such as medical records, death certificates, or any other evidence that substantiates your claim.

It’s important to be honest, clear, and concise in your explanation. The IRS will review your request and supporting documentation to determine whether to grant tax penalty abatement. If approved, the penalties may be partially or completely waived, reducing the overall tax liability.

How To Request First-Time Penalty Abatement Relief With Your Seattle Tax Lawyer

Seeking First-Time Penalty Abatement can save you both time and money, but it’s important that you apply correctly. If you meet the criteria, here’s how you approach it:

1. Make a Verbal Request: Your lawyer can call the IRS directly and request penalty relief over the phone. This is a suitable approach for straightforward cases. However, for more complicated scenarios, a written request is often more effective.
2. Written Request: If your case is intricate, or you’re more comfortable with documentation, have your attorney write to the IRS explaining your situation. This also provides a paper trail, which can be useful for future reference.

Remember, while FTA is a valuable relief, it’s a one-time offer, so evaluate with your lawyer if this is the best time to use it.

Taxpayers should never attempt to navigate tax regulations on their own, particularly corporate taxpayers. Seek help from an attorney as soon as you realize you need to approach the IRS for a reasonable cause exception.

Partner With a Tax Attorney Who Can Help With Tax Penalty Abatement

While understanding the basics is crucial, seeking the guidance of an attorney is the only truly safe way forward to establish reasonable cause for possible penalty abatement.

A lawyer can provide strategic advice on your tax matter, ensuring you have the strongest possible case. An attorney’s nuanced understanding of tax law can also be the difference between successful penalty abatement and denied requests.

When dealing with penalties, having a tax attorney to guide you through the complexities also ensures that every step taken is in line with the latest laws and regulations.

Reasonable Cause or First-Time Penalty Relief Sample Letter

If you believe you qualify for reasonable cause or First-Time Penalty Abatement, drafting a concise and compelling letter to the IRS is often the first step. While the specifics of each case will vary, in general, any letter will:

1. Begin with Identification: The letter will usually start by providing necessary details such as your name, address, Social Security Number, and the tax period for which you’re seeking relief.
2. State the Type of Relief Requested: The next step is to clearly mention whether you’re requesting relief based on reasonable cause, First-Time Penalty Abatement, or any other criteria.
3. Detail the Facts and Circumstances: The next section of the letter is where it will explain the facts and circumstances that led to the penalty. Were there unforeseen hardships, health issues, or other challenges? This is also the section where it will prove that a taxpayer acted in good faith and was careful to exercise ordinary business care.
4. Provide Supporting Documentation: A letter of this type will also need to present all supporting documents that corroborate the claims. These could include medical records, death certificates, letters from professionals, correspondence from the IRS, and more.
5. End With a Request for Abatement: The letter should conclude by reiterating the request to waive penalties based on the grounds already stated.

How To Request Penalty Relief Based on Reasonable Cause

Seeking penalty relief based on reasonable cause requires a structured approach. Before approaching the IRS, your tax lawyer will help you assess if you truly have a reasonable cause.

Then, you’ll take time to gather all your documentation. Concrete evidence strengthens your case. Collect and compile all relevant documentation that can support your claim. Again, your tax attorney will be able to tell you what you need, and there can be unexpected requirements.

You might need something as simple and expected as an old tax return or medical documents, or more unexpected documents, like old tax court records (if applicable), late payment notices from the IRS, paperwork from a civil fraud case, and much more. Your Seattle attorney will help you find all the necessary documents.

With your documents in hand, you’ll need to write out your request for abatement within a reasonable period, setting forth the facts and circumstances in a way that puts you in the best possible light. This request should encapsulate why you failed to meet your tax obligations and how the circumstances were beyond your control.

The emphasis on “reasonable” means the average person in your position would have faced the same challenges. Again, your lawyer is the best person to help you craft a request that will be accepted.

How To Request Penalty Relief Due to Statutory Exception

Statutory exceptions refer to situations where external legislation or a directive from the IRS has permitted penalty relief. This often arises from changes or amendments to tax law, IRS advisories, or specific guidance that provides an exception. These are rarer exceptions.

If you believe a statutory exception applies to you, your first step is to ask your lawyer about the specific exception and whether it applies to your case.

Then, you will again gather all necessary documentation that shows you’re entitled to this exception. This may include specific IRS notices, any correspondence you received about the changes in law or Internal Revenue manual regulations, or any official advisories.

Given the specificity of statutory exceptions, it’s always advisable to send a written request detailing your claim and the supporting tax laws or advisories. Ensure you attach all pertinent documentation, and have your lawyer run point on this for the best outcome.

What If the IRS Rejects My Request?

Facing a rejection from the IRS in your quest for penalty abatement can be discouraging, but it’s not the end of the line. Before moving forward, review the reasons the IRS provided for rejection. It could be due to a lack of evidence or an oversight in your submission.

If you believe the IRS’s decision unfounded, consider filing an appeal on this tax matter. The appeal will be reviewed by specialized appeals officers who can provide a fresh perspective on your case.

You should already have been working with a tax attorney, but if you made the first appeal attempt on your own, and it was rejected, now is the moment to get your Seattle tax lawyer involved.

Their expertise can be instrumental in presenting a case more effectively, proving more conclusively that a taxpayer acted in good faith, or identifying avenues previously overlooked.

When Might a Seattle Business End Up in Tax Court Over Penalty Abatement Issues?

Tax court is a specialized federal court that deals exclusively with disputes between taxpayers and the Internal Revenue Service (IRS) concerning tax determinations. A Seattle business especially may find itself in court due to various circumstances related to reasonable cause penalty relief issues.

If the IRS assesses a penalty against a Seattle business and the business disagrees with the determination, it may choose to challenge this decision.

For instance, the IRS might impose accuracy related penalties on a business for alleged discrepancies in its tax return or accuse the business of willful neglect. If the business believes it exercised ordinary business care and prudence, and the discrepancies were unintentional, it might contest the penalty.

A Seattle business that has applied for penalty abatement based on reasonable cause and has been denied might also decide to escalate the matter. If administrative appeals within the IRS don’t result in a satisfactory outcome, the next step might be court.

Some tax issues are simply more intricate, involving interpretations of law or complex factual determinations. In such cases, even if a business believes it has a strong argument for abatement, the IRS might disagree based on their interpretation of the laws, leading to a dispute that is best resolved in court.

For larger Seattle businesses, tax penalties can be substantial, too, so if a business believes that the penalties imposed are unwarranted and could cause undue financial hardship, they might be more inclined to seek resolution in court rather than pay the penalty.

Other Reasons to Consider Court

Sometimes, a business might choose to go to court not just because of the immediate financial implications, but because the case might set a precedent for future tax issues. This is particularly true for larger corporations or industries, where a court decision can influence future tax obligations and ongoing business practices.

In the process of determining penalties, the IRS might also issue a summons requesting specific information or documents from the business. If the business believes that the IRS is overstepping its bounds or the request is unjustified, it might challenge the summons, which can lead to a tax court proceeding.

Finally, a business might have been acting on the advice of a tax adviser when making certain decisions related to their tax returns. If the IRS penalizes the business and the business feels that the advice was sound and within the bounds of law, the business might go to tax court to vindicate its position.

While going to court provides an avenue for resolving disputes with the IRS, it is a formal judicial process. Preparation, legal representation, and understanding the implications of going to court are crucial.

A knowledgeable Seattle tax attorney is even more essential than ever here and can provide guidance on the merits of the case, the likelihood of success, and the potential costs and benefits of proceeding to court.

Challenges Faced in Court Over Penalty Abatement

If businesses decide to challenge IRS decisions regarding penalty abatement in court, several challenges and considerations may come into play. Considering these challenges shows just how important it is to work with a qualified legal professional.

A significant challenge in court is meeting the evidentiary burden. The business has the responsibility to prove that the IRS’s determination is incorrect. This involves providing detailed records, substantiating claims, and demonstrating how the facts align with their interpretation of tax laws.

For example, if arguing for an abatement due to serious illness or unavoidable absence, the business must furnish concrete evidence, such as medical records or other corroborative documents.

Furthermore, the law is intricate, especially with regard to taxes, with many nuances and subject to different interpretations. While a business might believe its actions were in compliance with tax regulations, the IRS might argue otherwise based on different tax law interpretations. This can result in extensive legal debates, with both sides presenting arguments anchored in tax code, prior case law, and regulatory guidance.

Time is also a pivotal factor in any court proceeding. Seattle businesses must be aware of the strict deadlines set by the court because missing a deadline, whether it’s for filing a petition or submitting evidence, can have dire consequences for the business’s case.

Taking a case to court is also not inexpensive. Associated costs include expert witness fees if the business needs to call on professionals to testify on their behalf, court costs, and the potential financial strain of prolonged litigation.

If the court rules against a business, the repercussions can extend beyond just the immediate case. Such a ruling can set an unwanted precedent for the business’s future dealings with the IRS. An adverse judgment might also impact the company’s reputation, especially if it becomes publicized.

So, while court is a venue for legal battles, it’s also a place for negotiation. Often, the IRS might be open to settling the matter before it reaches a full-blown trial. Seattle businesses should be prepared for potential settlement discussions, understanding their bottom line and areas where they can compromise.

In penalty abatement cases, the facts matter immensely. While the interpretation of tax law is crucial, the court will place significant weight on the actual events that transpired. Did the business act with good faith? Were there concrete efforts to rectify any mistakes? These factual determinations can heavily influence the court’s decision.

Even after a decision is rendered by the court, the journey might not be over. Either party, the business or the IRS, can decide to appeal the decision to a higher court, prolonging the resolution of the case.

In light of these challenges, it’s clear that while going to court is a way to challenge IRS determinations, it is not easy and will not necessarily be successful. It’s never wise to take this step without an experienced Seattle tax lawyer.

Applying for Penalty Relief

When applying for penalty relief, there are different considerations based on whether it is your first time seeking relief or if you have previously received relief. For first-time penalty relief, eligible taxpayers with a history of compliance qualify for waivers for penalties associated with a specific tax period. These are almost always granted. On the other hand, if you have already received penalty abatement in the past, the criteria and level of scrutiny may be higher.

What Are the Penalty Relief Options?

The IRS offers penalty relief for various penalties. Relief can be applied to the taxpayer’s account, reducing or eliminating the assessed fees. There are multiple options for penalty relief, including first time penalty abatement for taxpayers with a clean compliance history and reasonable cause relief. There are also statutory exceptions for specific circumstances.

The IRS evaluates each case individually, considering the taxpayer’s circumstances, compliance history, and supporting documentation. It’s important to note that relief from penalties does not automatically waive outstanding tax amounts or other charges.

What Is Reasonable Cause Relief?

If you’ve already benefited from first time penalty abatement, you can still get certain penalties removed from your account, as long as you can prove that you had a reasonable cause for late payment. The IRS considers a severe illness, a natural weather event or disaster in your area, the death of a close family member, or financial hardship to be reasonable causes.

Do I Qualify for Penalty Abatement?

You’re likely to qualify for first time penalty abatement if you haven’t had any issues with the internal revenue service in a previous tax year. Penalties eligible for abatement include the late filing, late payment, and failure to deposit penalty.

If you’ve already benefited from first time abatement, you can get relief if your failure to file or pay was caused by unforeseen circumstances such as job loss or a severe illness. The best way to determine whether you’re a candidate for the IRS’ administrative waiver is to speak to an expert. They can evaluate your situation and determine whether you’re a good candidate for penalty abatement.

Do I Need the Help of a Tax Professional?

Some people believe that requesting penalty relief is a simple process, so they don’t hire a tax specialist. While this sometimes works out, there are no guarantees. Unless the individual has never had issues with the internal revenue service before, they might struggle to receive penalty abatement. This is because it is only granted to those who have a strong reasonable cause argument.

Working with a competent expert can help individual taxpayers to rectify their mistakes and prevent issues in the future. The professional will carefully analyze the person’s situation and determine the best strategy to minimize their tax bill.

Helping You to Make Good Decisions

A competent tax professional can help you to get rid of penalties in one tax period and prevent problems in the next tax year. They will advise you to always file your tax return on time because the failure to pay the penalty accrues much more slowly than the failure to file the penalty. By filing your return as soon as possible, you can avoid a 5% charge every month.

What If My Penalty Abatement Request Is Denied?

First-time abatement requests rarely get denied. However, those who request relief for the second or third time might run into issues with the IRS. Fortunately, you have options for further recourse if your initial request doesn’t get approved. Firstly, you can contact the IRS to seek clarification on the reasons for the denial and understand if any additional information or documentation can strengthen your case.

Alternatively, you may consider filing an appeal, which involves submitting a formal protest to the IRS Office of Appeals. This initiates a review of your case by an independent appeals officer. It’s crucial to provide a compelling argument and supporting evidence to demonstrate reasonable cause for penalty relief. Seek professional tax advice to navigate the appeals process and present a strong case.

Applying for Installment Payments

Receiving penalty abatement isn’t the only type of relief you can get. Several forgiveness programs can help you to pay off your outstanding debt. The most accessible one is the installment agreement: a payment arrangement between a taxpayer and the IRS to settle tax liabilities over time. It allows taxpayers to pay their taxes in monthly installments instead of a lump sum.

Under an installment agreement, the taxpayer agrees to make regular payments until the tax debt is fully paid off, including any accrued interest and penalties. The IRS evaluates the taxpayer’s financial situation to determine the monthly payment amount. Installment agreements provide a viable option for individuals and businesses who cannot pay their tax liabilities in full immediately, helping them fulfill their tax obligations while avoiding more severe collection actions from the IRS.

Is the Installment Agreement Always the Best Option?

While an agreement with the IRS is a standard and convenient option for paying off tax debts, it may not always be the best choice for everyone. In certain circumstances, exploring alternative payment methods can be more advantageous.

For instance, if the taxpayer has access to a zero-interest credit card or can obtain a low-interest personal loan, it might be more cost-effective to use these options. By doing so, they can potentially save on interest charges and settle the debt more quickly. It is essential to compare the terms, interest rates, and potential fees associated with different payment methods before deciding on the most suitable approach to resolve tax liabilities.

Other Ways to Receive Relief

In addition to penalty relief and installment agreements, there are other strategies available to receive tax relief. One such option is an Offer in Compromise, which allows individuals to settle their tax debt for less than the full amount owed. To qualify, taxpayers must demonstrate an inability to pay the full tax liability or prove that paying it would create significant financial hardship. Another strategy is obtaining Currently Not Collectible status, which temporarily suspends IRS collection efforts.

People who are facing financial hardship and cannot afford to pay any of their tax debt may be classified as currently not collectible, providing temporary relief from collection activities. However, interest and penalties continue to accrue during this period. Furthermore, Innocent Spouse Relief provides relief to individuals who are held liable for tax debts resulting from their spouse’s or former spouse’s incorrect or fraudulent reporting.

Figuring Out Your Estimated Tax Penalty

Figuring out your estimated tax penalty involves calculating whether you owe any additional taxes for underpayment or late payment of estimated taxes. To determine the penalty, you need to estimate your total tax liability for the year and compare it to the amount you have already paid through withholding or estimated tax payments.

If the difference exceeds a certain threshold set by the IRS, you may be subject to a penalty. The amount is calculated based on your debt and the duration of the underpayment. Because the calculations can be complex, working with tax professionals is usually recommended. Don’t hesitate to reach out to an experienced tax attorney in Seattle, if you need help.

 Why Choose Seattle Legal Services, PLLC?

Talk With a Seattle Tax Lawyer Right Away

Tax complexities can be a challenging maze for businesses or individual taxpayers to navigate alone. Whether you’re grappling with penalty abatement issues or seeking guidance on broader tax matters, having a skilled ally by your side can make all the difference.

Seattle Legal Services, PLLC, offers the expertise and support you need to confidently address your tax concerns. Don’t go it alone; reach out to us today at 206-536-3152 and ensure your financial future is in capable hands. We serve residents of Seattle, Bellevue, Tacoma, Kirkland, and Lynnwood struggling with their income taxes, employment taxes, payroll taxes, or property taxes.