Have you ever done something like file your tax return late without filing an extension or paid your taxes after April 15th only to get hit with a substantial penalty from the IRS? How substantial is the penalty? Let’s say that you filed your tax return in September, did not file an extension in April and owed $2,500.00 in taxes. Your failure to file penalty for not filing an extension or filing by April 15th would be $562.50. But wait there is more…your failure to pay penalty would be $75.00, and interest would be $33.51. So, that $2,500.00 tax bill will now become a $3,178.55 tax bill. That is $645.04 in penalties and interest or almost 26% of what you originally owed in taxes. THAT IS INSANE! Just because you made a simple mistake you have to pay an additional 26%. Who has that kind of money just laying around?
I am going to tell you a secret about this penalty that most people don’t know. Believe it or not the IRS realizes you are human and might have made a onetime mistake. If this is your first time ever being late filing and paying your taxes, I have a simple remedy for you. You have a ONE TIME oops I made a mistake penalty waiver. You would simply crack open your laptop and write the IRS a letter stating that you made a simple mistake, and you are requesting this one time waiver of the penalties. You can’t get the interest waived, but what is $33.51 between friends? The IRS isn’t simply going to tell you about this abatement of the penalties, because most people don’t know about it, and simply get out their checkbook and write a check. Even some professionals don’t know this exists. You have to ask for it.
Technically you are asking for a waiver of penalties under IRC §6724, if you want to impress your friends at a party someday, you can throw that Code Section out there.
As with most cases, you don’t get if you don’t ask, so simply ask!