Can You Avoid the IRS' "Failure to File" Penalty After Tax Day?

The IRS' “failure to file” penalty begins to accrue immediately as soon as you fall behind on your federal returns. Even if you don’t receive a penalty notice from the IRS, you are still liable for the penalty, and both past-due taxes and penalties begin accruing interest immediately as well. As a result, falling behind on your federal returns can increase your liability significantly. What are your options in this scenario? Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains.

5 Potential Options for Mitigating Your Liability to the IRS

If you are facing the IRS' failure to file penalty, the options you have available depend on your specific circumstances. With this in mind, here are five potential alternatives to paying the full amount you owe:

1. Disputing Your Penalty Amount

If you disagree with the amount the IRS says you owe, you may be able to dispute your penalty amount. There is a formal process for disputing IRS penalties, and before initiating a dispute, you will want to ensure that you have the documentation you need to prove that the IRS' determination of your liability is incorrect.

2. Seeking Penalty Relief

If you qualify, you can also seek penalty relief from the IRS. Penalty relief is available in three primary circumstances: (i) first-time penalty abatement; (ii) relief based on “reasonable cause”; and (iii) relief based on a statutory exception. If you think you may qualify for penalty relief, a Virginia tax attorney can help you determine if seeking relief is your best option under the circumstances at hand.

3. Submitting an Offer in Compromise

If you cannot afford to pay the full amount you owe, you may be eligible to submit an offer in compromise. While there is no guarantee that the IRS will accept your offer, if it does, you could potentially resolve your tax debt for significantly less than your outstanding liability.

4. Seeking to Settle Your Tax Debt with the IRS

Another potential option is to settle your tax debt with the IRS. Even if you are not eligible to submit an offer in compromise, the IRS may still be willing to enter into a settlement agreement based on the circumstances of your case. However, seeking a settlement agreement can be risky, so it is important to engage experienced tax counsel before you contact the IRS.

5. Submitting a Voluntary Disclosure

If you have intentionally failed to comply with the Internal Revenue Code, you could be at risk of facing criminal penalties. In this scenario, submitting a voluntary disclosure could be your best option. However, this option can be risky as well; so, here too, experienced legal representation is essential.

Which of these options should you choose (if any)? Answering this question will require a careful assessment of your individual circumstances. To ensure that you make an informed decision, you should discuss your options with an experienced Virginia tax attorney as soon as possible.

Facing IRS Penalties? Request a Consultation with Virginia Tax Attorney Kevin E. Thorn Today

Are you facing substantial IRS penalties? If so, we invite you to contact us for more information. To request a consultation with Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 703-752-3752 or contact us confidentially online today.