If you have underpaid on your taxes, failed to file returns or pay taxes in a timely manner, you are a prime target for I.R.S. penalties and interest. There are a variety of reasons that taxpayers in Illinois, who are otherwise conscientious citizens, fall short of the mark when it comes to paying taxes. Studies have shown that taxpayers neglect to file returns in years when there are changes in circumstances. Reasons can also be emotional or financial, if they are unable to pay their tax returns. Sometimes it’s just the result of procrastination.
Regardless of the reason, neglecting to file tax returns can lead to serious problems down the road. When the next year’s return, taxpayers will have the stress of having to pay back taxes, filing the right paperwork for earlier returns, finding old records and, most worrisome, being discovered by the I.R.S. Most importantly, the debt compounds over time as penalties and interest accumulate.
There are actually a large number of penalties that the I.R.S. can put into effect as a result of a failure to pay taxes, but only a few are commonly put into place. The most typical penalties include the Failure to File Penalty, Late Payment Penalty, the Penalty for Underpaying Estimated Taxes, the Substantial Understatement Penalty and the Penalty for Negligence and Intentional Disregard. The most severe penalties are penalties for tax fraud; sometimes penalties can be as much as 75% of the underreported amount. However, this does not underplay the severity of other penalties, which can sometimes add up to as much as the initial amount owed.
Penalties are put into effect to pressure taxpayers to comply with the I.R.S., but they also exist to ensure fairness. Without penalties, there would be nothing to stop all taxpayers from paying late, or not paying at all. However, not all penalties are enacted justifiably. Even in cases when the I.R.S. has grounds to enact penalties, penalty abatement and interest abatement can be arranged. Taxpayers in Illinois can refer to an I.R.S. assessment letter or an Audit Examination Report to indicate your penalty and interest status. With the help of a tax professional, you can use these documents as grounds to negotiate for a Penalty Abatement.
An I.R.S. Penalty Abatement in Illinois is one way to reduce penalties and interest on back taxes. Penalty Abatement enables taxpayers to eliminate a significant amount, if not all of the penalties, excluding interest (this must be removed by an Interest Abatement), if the taxpayer can show reasonable cause. A Penalty Abatement is a veritable blessing for taxpayers in debt, saving them as much as 90% of their initial tax amount owed as a result of penalties and interest buildup. Penalty Abatement is difficult to negotiate on your own, however, and usually requires the help of a tax professional.
Time is of the essence when it comes to paying back taxes. The longer a debt goes unpaid, the more penalties and interest build up. These days, no one has that kind of extra money to throw away. For assistance in arranging for a Penalty Abatement in Illinois, enlist an experienced tax team to help you.