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Penalty Abatement: Eliminating FTB Tax Interest

August 12, 2024March 2, 2016 by Brotman Law

If you have an outstanding tax liability owed to the California Franchise Tax Board (FTB) past the due date, your tax bill is at risk of growing much larger over time. By law, the Franchise Tax Board must charge interest on unpaid taxes. This interest is charged from the due date until the date it is paid, is adjusted twice a year, and compounds daily.

On top of this interest, a delinquent penalty rate is charged. The rate is 5% of the total unpaid tax, and a further 0.5% for each month or part of a month over the due date that the tax remains unpaid, up to 40 months. Other penalties for returned checks, understatement, negligence and fraud may also add to the overall total owed to the FTB. There is no “reasonable cause” exception for interest due on your tax assessment. In some specific cases, however, you may qualify for tax interest penalty abatement. This concession from the FTB can make paying your late taxes less of a burden.

IRS Penalty Abatements and Reasonable Cause

August 12, 2024December 16, 2013 by Brotman Law

IRS Penalty Abatements

As noted previously, the purpose of (assessing) a penalty is to encourage voluntary compliance. “Voluntary compliance exists when taxpayers conform to the law without compulsion or threat” (IRS.gov, “20.1.1.2.1 Encouraging Voluntary Compliance,” 8/14/2013). The taxpayer supports the tenets of the Internal Revenue Code in achieving voluntary compliance when he or she makes a good faith effort to meet all tax obligations (“Encouraging Voluntary Compliance”).

How IRS Interest is Calculated

August 12, 2024December 16, 2013 by Brotman Law

You are required to file a return if you have earned income in the previous year. You are also required to pay all tax by the due date to avoid IRS interest and penalty charges. The official due date to file and pay taxes is April 15. This is the “deadline for most people to file their individual income tax return and pay any tax owed” (IRS.gov, “Topic 653 – IRS Notices and Bills, Penalties and Interest Charges,” 7/26/2013). All U.S. tax returns are checked for mathematical accuracy. In the event that you owe money to the IRS, you will be sent a bill. With this in mind, familiarize yourself with the different types of penalties and IRS interest charged to your tax balance as well as the procedures and methods used to calculate interest and penalties.

More on IRS Interest Abatements

August 12, 2024December 2, 2013 by Brotman Law

According to section 20.27.1 Interest Abatement and Suspension Overview, reasonable cause can never serve as the basis for an IRS interest abatement (IRS.gov, 8/14/2013). With this in mind, the interest on a tax liability will accrue from the return due date until the taxpayer pays the tax obligation in full. Exceptions to the law may allow the authorization of an abatement, or suspension of interest. Exceptions may also consider certain periods relative to computing interest. When exceptions are overlooked, taxpayers may exercise the option for filing Form 843, Claim for Refund and Request for Abatement, or submitting written, signed correspondence requesting consideration.

First Time Penalty Abatement Program

August 12, 2024December 2, 2013 by Brotman Law

The First Time Penalty Abatement Program relief is a one-time consideration that is applied to a first-time penalty charge. The penalty relief is based upon the taxpayer’s compliance history.

Penalty Abatements: Reasonable Cause Factors – Part Three

August 12, 2024October 13, 2013 by Brotman Law

Continuing my series on Tax Penalty Abatements. Click Here to read Part Two

IRS Interest Abatements

August 12, 2024October 4, 2013 by Brotman Law

Introduction to IRS Interest Abatements

Any balance due that is owed to the IRS government will continue accrue interest on the amount of the outstanding tax obligation. The interest rate is generally pretty low in comparison with other types of debt,[1] but over time the amount of interest can add up and turn a small liability into a sizeable one. Unfortunately there is not too much to be done about your liability accruing interest and it is simply the cost of doing business with the IRS. However, there are certain mitigating circumstances where a taxpayer is able to do an IRS interest abatement in order to avoid the accrual of interest on some or all of the liability. When an IRS interest abatement occurs then the interest on a balance due can be abated altogether or just specific periods of time can be excluded from the interest calculation.