If you owe money to the IRS, they are going to want that money back with interest and penalties. However, there may be a way to reduce your tax bill in Texas, even if you can’t pay it in full.
Understanding IRS penalties and interests
The IRS charges penalties if you:
- Fail to file your tax return on time
- Prepare an inaccurate return
- Don’t pay taxes the right way
- Don’t pay the full amount owed
The IRS also charges interest on unpaid taxes. They calculate the interest on a daily basis and compound it until you pay off your debt. The current rate for interest on overdue taxes for 2022 is 6%.
Penalty Abatement in Texas
If you qualify, penalty abatement may be able to reduce or eliminate some of your penalties and interest. This option can help reduce your tax debt and make it more manageable so that you can pay what you owe without breaking the bank. However, this program isn’t automatic – you have to meet certain criteria and apply for it with the IRS.
There are four things to consider when applying for penalty abatement:
- You must have filed all required returns and paid any taxes due on time in recent years.
- You must have a reasonable cause for not meeting your tax obligations (for example, illness or natural disaster).
- You must make sure that the IRS has all of your financial information so they can make an accurate assessment of what you owe.
- You must demonstrate that paying the taxes would cause economic hardship for you or your family.
If you can’t pay your taxes before the deadline, you can file an extension request with the IRS. This will give you more time to pay your taxes in full without facing any penalties or interest. However, it’s important to remember that this is not a solution – it merely gives you more breathing room. You still need to pay your taxes in full at some point or else face stiffer penalties and interest charges from the IRS.
Remember, if you fail to pay your taxes on time, don’t panic. You might qualify for an IRS abatement.