The IRS can be tricky to navigate. Every year the tax code is updated and even then, those who work for the IRS don’t know what the tax code even means anymore. But here are some important pieces of information about business tax reports that you need to know firsthand to overcome penalties and fines for not filing a tax report.
For business who fail to file, the penalty from the IRS could be as high as $25,000 dollars per year. A tax bill that has not been paid could result in a 5% interest penalty and a 25% interest penalty for an unpaid tax return. The penalties and interest can often be twice or more the cost of the taxes owed from a business. That can be very expensive and costly to the business as a whole. But what is the best solution? It’s simple, show reasonable cause as to why the fine should be removed or keep up with your tax files.
If you are behind in a tax owe for the month and the interest begins to add up, it is easy to tackle the problem by showing a reasonable cause to ask for those penalties to be reduced. Some methods of reasonable cause include serious illness, destruction of home or business by fire or natural disaster, a tax professional that provided terrible advice, inaccurate information from the IRS itself (keep in mind these tax rules change on a yearly basis), wrong information from a customer, or you were in a serious financial problem and you couldn’t pay the bill. The IRS can look into the claim and they can work with you to help you get your IRS tax payments back on track.
To request your penalty to be reduced, write a letter that is clear and concise that explains your current situation that shows a reasonable cause as to why you’re behind on your taxes/. The next thing would be to file the form 843, which claims you want a refund or a reduce in your penalty and make sure to include supporting documents such as doctor’s notes or insurance papers.
What happens when your request is denied? Then we have only two options one is to protest with the agency, the other one is to offer-in-compromise which is a lot harder to get. However, there is something seriously important from the IRS and that is getting a first time abate policy. This policy states that if you never had a late payment on your taxes three years prior, you can wipe out any penalty that the IRS may put on you.
As for reducing the interest, those are fairly slim, but you can get some wiggle room in those areas alone. One way is to say that the IRS made an error or you have recently settled something with the IRS, the IRS sent you a refund by accident or they take too long, you live in a disaster zone after you sent in a late tax payment or filed for bankruptcy. All of these options can help you with some wiggle room in the interest, but not enough to help you with the relief you need.
As for business who forget to file their taxes can come from losing money and that they cannot legally pay the amount of money. Yet it is still important to file because if your business has growth in certain years, especially the first year, you can easily put money in your pockets if you are eligible for a tax credit for your business.
Tax credits work where refunds don’t. The IRS currently says they can give you a refund only if your taxes were different three years prior than they are now. However, given the fact that the IRS is often slow in the process of refunding your money, the tax return is a voluntary statement, but it should be an obligation, period.
Now if you receive a notice for not filing a business tax, be proactive and don’t slack off. These things are serious and they can affect your tax returns, your credit, and your financial standing for your business. The IRS could seize and obtain your assets when it gets to this point, but to avoid the problem, work with the IRS and also work on making sure your tax payments for not only yourself, but your business as well, always end up at the IRS headquarters on time.
Taxes can be tricky and hard to navigate. But having someone else do them may also be a problem in itself than learning how to approach it in the best situation. Finding the right forms is hard enough, but making sure you follow all the procedures correctly the first time is the best thing that can happen to you. Making sure you stay ahead of the IRS and any taxes, personal and business, can keep you out of trouble with the IRS.