Can We Avail Tax Deduction While Giving The IRS Penalties?

 

Internal Revenue Service, also known as IRS, is the federal body responsible for collecting taxes countrywide. They are also responsible for examining any irregularities found in tax collections. IRS follows the complex tax laws of our country to claim and fight against corruption. Understanding all these laws for an ordinary person is not easy. The IRS can impose a penalty on you when you file a late tax return.

In this blog, we will discuss whether it is possible to get a tax deduction on our penalty or not. Typically, the IRS imposes penalties on your existing tax amount along with interest. To know further, read the following write-up.   

Why Do We Pay IRS Penalties?

According to experienced tax experts (including federal tax lawyer), a person needs to pay penalties only when they delay in paying taxes or don’t pay taxes at all. IRS imposes those penalties to discourage any irregularities.

 Although a penalty can help decrease late tax payments, it also adds pressure on a taxpayer. For this reason, the IRS does not directly impose penalties. First, they send notice to the taxpayer informing them of their delay. They act further if they don’t receive a proper reason or reply.

Is Tax Deduction Possible?

If you have any tax-related problems, you should hire a tax expert (like - tax an attorney for IRS problems). Do you know that IRS publication 529 says any legal expenses related to taxes are no longer deductible?

You can deduct tax amounts as profit or loss in your business or rent but not anything else.

Other Penalties

Although IRS penalties are not deductible, some other penalties can be deducted from your tax amount. Suppose you have spent an amount on manufacturing but have incurred a loss due to other business expenses. These amounts can be deducted from your tax debt.

Key Points

We have discussed how the IRS works and when they impose a penalty on a certain person. To understand the situation simply, let’s look into the key points-

1.      Deduction of penalty from a person’s tax amount is not possible.

2.      Only if a person fails to pay his taxes on time or does some irregularities the IRS imposes taxes on them.

3.      If you don’t pay your tax on time and further don’t pay your penalty as well, it will accrue. You can get into much bigger trouble in that way. If you are already in this situation, consult an experienced tax professional (like Orange County tax attorneys).

4.      If a taxpayer wants more time to file his tax return, he can do so using Form 4868. IRS tax law offers some extensions for those who need it.

We hope this blog will help you understand the working style of the IRS. If you find it tough to understand all these IRS tax protocols, you can simply hire an experienced tax professional for yourself.