In some cases, the IRS may actually forgive late-filing penalties

The 2016 April 18 tax deadline is quickly approaching and, barring special circumstances, taxpayers are expected to both file and pay their taxes on time. While the Internal Revenue Service fully expects the vast majority of U.S. taxpayers to comply with the April 18 tax filing deadline, the agency isn't completely unforgiving when it comes to cutting taxpayers who find themselves in extenuating situations some slack.

In most cases, taxpayers who fail to file their tax returns on time are subject to a failure-to-file penalty which equates to five percent "of the unpaid taxes for each month or part of a month that a tax return is late." That figure, however, can increase to total up to 25 percent of the unpaid tax amount. Despite the IRS' reputation for taking a very black and white approach to this and most tax issues, there are certain times when the agency may take pity on a taxpayer and decide to waive such penalties.

According to IRS records, so-called "reasonable explanations" for failing to file taxes on time include dealing with the death of a family member as well as one's own health issues. Additionally, the IRS has accepted the justification of burglary for late filings. In one case, the agency even waived the late-filing penalties of one man who "just shut down and stopped filing for several years as fear and anxiety mounted." In this case, the man took action to file and assess all taxes owned and the IRS decided to abate the late-filing penalties as the man "had no malicious intent."

While it's encouraging to know that the IRS does, at least in very limited cases, appear to be somewhat understanding of late-filers, taxpayers should know that many excuses simply won't fly. For example, blaming a tax preparer or accountant for a late filing won't likely absolve an individual from paying late-filing penalties. Additionally, the IRS doesn't look kindly upon taxpayers who use the excuse that they didn't know about certain requirements or filing dates.

To avoid costly penalties, all taxpayers should do their best to file and pay taxes on time. However, life happens and there are situations that can make it difficult to impossible for a taxpayer to meet filing and payment deadlines. In cases where an individual plans to dispute late-filing or late-payment penalties, it's wise to contact an attorney who handles tax cases.

Source: USA Today, "What late-filing excuses work with the IRS," Lisa Kiplinger, April 11, 2016

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