Penalty abatement is a form of tax debt relief you can avail to significantly reduce the total tax you owe to the IRS.
What is Penalty Abatement?
If you have a tax debt, the IRS will calculate penalties and interest on the amount owed. The penalties include a 'failure to file' penalty if you have failed to file your returns on time (including extensions), a 'failure to pay' penalty if the tax amount has not been paid in full and which is calculated on the basis of the amount you owe. These two penalties are charged on a monthly basis for the entire period until resolution. Further the IRS charges a daily interest on the tax amount you owe. All in all, the each penalty may contribute up to 25% of your total tax bill.
If your failure to pay taxes has been due to financial difficulties, such difficulties are further compounded by the penalties, which continuously keep adding to the total tax debt. So penalty abatement is an option you should definitely consider to achieve some degree of tax debt relief. As professional enrolled agent, Mike Habib can guide you in this matter if you do not feel confident enough to handle it on your own.