What Are Tax Penalties and What Can You Do About Them?

May 16, 2012 by  Filed under: Taxes 

When you’re having tax problems, it’s important to know what you’re up against, and also what steps you need to take to make things right. If you’re facing tax penalties, a tax resolution pro can help you understand what those penalties are and help you create a plan to resolve them as well.

A tax penalty is a punitive measure imposed by the IRS in response to misfiled, incorrect, or missing taxes. However, there are many different types of tax penalties out there, and also many different ways to resolve them. Unless you feel confident in your understanding of the tax code and the workings of the IRS, the best way to handle a penalty situation is to work with a certified tax resolution professional. He or she will be able to provide the information and expert advice you need in order to get your financial situation back on track.

When it comes to navigating tax penalties, the first thing to do is to determine what type of penalty you’re dealing with. There are over 140 tax penalty types, and, if you’re having tax problems, it’s likely that you’re facing a combination of these. Tax penalties can be enacted by the IRS in relation to any of the following:

* Inaccurate information
* Fraudulent returns
* Underpayment
* Missing payments
* Late returns

Depending on your situation, you could be facing penalties in the form of monetary fines or seizure of property (also called tax liens). Keep in mind that these penalties are all in addition to paying the outstanding tax due. If you’re having tax issues, your tax resolution pro will be able to break down the legalese of IRS communications so that you understand exactly what you did wrong and what consequences the IRS is handing down.

Once you know the specifics of your penalty situation, your resolution expert can then offer tax help to formulate a plan of action that is workable for all involved. That can mean figuring out how you can resolve your debt with the IRS without going through undue hardship or making a case to the IRS to be relieved of all or part of the debt owed. Some of the most frequent tax resolution actions are:

* Offers in compromise: a compromise between you and the IRS to settle your tax debt for less than the total amount owed
* Installment agreements: a installment-based payment plan that will allow you to resolve your tax debt over time
* Penalty abatement: having an amount deducted or subtracted from the total penalty you owe
* Innocent spouse relief claims: tax relief granted when your tax debt is based on actions of your current or former spouse
* Wage garnishment releases: no longer having the IRS deduct money automatically from your paycheck as payment of tax debt

The bottom line is you have to pay the IRS the tax that you owe, and you’re accountable for the applicable penalties when you fail to do so. The job of a tax resolution expert is to make all of that happen as quickly and affordably as possible.

If you’re having tax problems, your local tax relief professionals can help. Contact them to find out what your penalties are and how you can work with the IRS to resolve your debt and penalty situation.

Penny Jones is an Internet marketer for Prospect Genius, a leader in local online advertising

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