Penalty Abatement
State
Since the US tax system revolves around voluntary compliance, the IRS and state tax authorities can assess penalties for noncompliance. We can help you determine if your case may qualify for a reduction or an elimination of the tax debt. We’ve successfully appealed millions of dollars in penalties and we are always excited to help our clients get relief from what can be exorbitant fees. Please schedule a free consultation if you think you may have reasonable cause as to why the taxes went unfiled and/or unpaid.
Questions?
Are states more or less likely to remove penalties than the IRS?
Although each state varies widely, we’ve seen most state tax authorities take a hard stance on penalties. Whereas the IRS has hundreds of pages in their manual dedicated to penalties and their removal, states have precious little available when it comes to relief and most proposals to the state are shots in the dark. We’ve had the most success with states that are big enough to act like the IRS (the California Franchise Tax Board and New York Department of Taxation and Finance come to mind), and smaller states take a hard line against removing any penalties. And although we’ve had success with New York, their penalty relief program is actually their Offer program, so it has more formal parameters in place. If you’d like help getting your state penalties removed or to see if that’s even possible with your State Tax Authority, please reach out today.
Do states impose the same high penalties as IRS for noncompliance?
Fortunately, state tax liabilities and their associated penalties are often significantly less than their IRS counterparts. If you compare your federal and state tax returns, you’ll see that the amounts you owe the state taxing authorities are significantly less than what you owe Uncle Sam. So that often means the stakes are much lower for a state penalty abatement: if the state only charges a few small penalties, then there isn’t really much available to get back with an abatement request. Most state penalty abatement requests we make are either in tandem with an IRS abatement or for a specific state tax issue which entitles full relief. We also submit them for taxpayers with debts in states that don’t have Offer in Compromise programs, since penalty abatement would be the only opportunity available to our clients for relief.
How much have you seen a State Tax Authority remove in penalties for a single household or business?
While we’ve had success with virtually every state in getting a reduction in penalties (some states don’t have income tax), it’s very rare that the amount is over $10,000. The most we’ve had opportunity to reduce was $89,000 from an elderly couple’s account who were on a fixed income. The removal of the penalties cleared their debt and provided them with a significant refund from the amounts the state had levied from both of their social security checks. So while we regularly reduce massive debts with the IRS through penalty abatement, the state taxing authorities charge less for tax and therefore less penalties. For our clients, though, any amount helps and even a reduction of a few hundred dollars from a taxpayer’s state debt can be impactful. Call us today if you’d like help abating penalties a State Tax Authority has assessed against your household or business.