The most common penalties that affect self-employeds are late filing and late payment penalties.

The IRS charges steep penalties for filing after the deadline or not paying in full by April 15th. The late filing penalty is generally 5 percent of the tax owed for each month the return is late, up to 25% of the total tax owed. The late payment penalty is 0.5% of the tax owed for each month the tax is unpaid, up to 25% of the total tax owed.

There is a way out using First Time Abatement Relief.

Who Qualifies?

• People with clean records with IRS; no bad marks for the last 3 years.

How much will IRS abate?

• Unlimited amount

Don't Qualify For FTA Relief?

Try the Reasonable Cause Method

• Must give IRS a specific reason you could not comply.

• IRS sees legitimate, reasonable cause claims differently than you probably do.

• Death or severe illness

• Fire, casualty loss

• Inability to obtain records

• For each of these reasons, you need to give specifics

  • Why

  • What you did do to try to comply

  • Why you couldn't under reasonable circumstances

• If you have none of these, you'll need to demonstrate you exercised ordinary business care and prudence but still were unable to comply.

Don't use the FTA for minor penalties; save for later when it could really benefit you.

You can obtain penalty relief on the phone or with a letter. Hold times with IRS are famously long but will be getting better with the forthcoming additional funding.

Before speaking with them, have all the details in front of you. Even write a script so you appear well-informed and knowledgeable about your situation.

IRS really does try to look for ways of getting you out of penalties but you must know the lingo, have the facts laid out, and fight for it.