How an Underpayment Tax Penalty Can Be Waivered
If you pay estimated taxes and your estimates come up short, then you could get hit with a stiff financial penalty from the Internal Revenue Service (IRS). Taxpayers who collect income that’s not subject to withholding are supposed to pay estimated taxes. This kind of income includes everything from investment dividends and interest to alimony and lottery winnings. Even paychecks earned by self-employed entrepreneurs are potentially taxed under these rules because nothing gets taken out of them.
The good news is that any penalty you owe on an underpaid bill can be waived.
Calculating Underpayment Penalties
You need to submit IRS Form 2210 to see if you owe any underpayment penalties, which involves calculating your total liability. The IRS calculates penalties based on each individual payment period, and the form comes with two calculation methods to help you find out how much you potentially owe. Use the most recent version of this form because underpayment penalties change annually.
Legitimate Reasons to Request a Waiver
Properly establishing reasonable cause for the underpayment is key to getting it waived. The IRS will require you to meet certain criteria before they’ll wipe away any penalties you might owe. All taxpayers who want to claim a waiver have to prove that they didn’t neglect to make estimated payments on purpose. One or more of the following also has to be true:
- A natural disaster, casualty, fire or other serious disturbance prevented you from making the payment on time
- You couldn’t receive records or other types of financial information needed to file;
- You became seriously ill or disabled before you had a chance to pay your estimated taxes
- After the age of 62 you decided to retire
Keep in mind that the IRS doesn’t consider insufficient funds to be a legitimate reason for failure to pay or file on time. However, the reason you didn’t have money at the time the estimated payments were due could meet the above criteria.
Requesting a Waiver from the IRS
Applying for a waiver can be as easy as including a written statement with Form 2210 that explains why you weren’t able to make the whole payment on time. You’ll also need to include the specific time period that you’re requesting a waiver for. Remember that the IRS charges penalties based on time intervals, and you may owe additional payments for more than one period with Payday Now. Make your case stronger by attaching documents that prove you meet one of the required criteria.
Professional Estimated Tax Relief
Paying estimated taxes can be a headache, so you may decide that you want a professional to look things over. Success Tax Relief helps taxpayers deal with many unique issues, and their trained tax experts will figure out whether you’re underestimating or overestimating how much of the pay-as-you-go tax you need to send to the IRS. Never feel like you have to handle this process by yourself. Our team can help you complete all of the necessary forms and compile documentation to prove your case. Contact us on the web for a free consultation or give us a call at 877-825-1179 to speak to a tax relief specialist today!