4 ms·

protects you from liability for incorrectly filing your taxes. In practice, it's not really needed. The thing is (and I realize that it's not the general perce

protects you from liability for incorrectly filing your taxes. In practice, it's not really needed. The thing is (and I realize that it's not the general perception) if you sincerely try to file your taxes and you screw up, the IRS will generally work with you to fix things. Sure, if you go all sovereign-citizen/Wesley Snipes and refuse to acknowledge taxes they'll kick in the door and take all your stuff. But if you accidentally report select head-of-household instead of single, and you can explain why you did, the IRS won't ruin your life.

dpifke 3y ago
They're even required to waive the penalties if you "acted with reasonable cause and good faith": https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR1d0453abf9d86e0/section-1.6664-4 https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A...
- junar 3y ago
  "Reasonable cause" is a pretty hard bar to meet. [1] > The following factors don't generally qualify as valid reasons for failure to file or pay a tax on time: > Lack of knowledge. You're responsible for knowing or getting advice on how to file returns and pay or deposit taxes on time. This includes filing requirements, deadlines and amounts you owe. > Mistakes and oversights. You're responsible for making sure your tax returns, payments and deposits are correct and on time. In certain cases, reasonable cause may apply to a mistake if additional facts and circumstances show that you tried to comply with tax law. A much easier path is first time abatement. [2] Though of course as the name indicates, it can't be used multiple years in a row. [1] https://www.irs.gov/payments/penalty-relief-for-reasonable-cause https://www.irs.gov/payments/penalty-relief-for-reasonable-c... [2] https://www.irs.gov/payments/penalty-relief-due-to-first-time-abate-or-other-administrative-waiver https://www.irs.gov/payments/penalty-relief-due-to-first-tim...
  - dpifke 3y ago
    That's for failure to file or pay on time. The bar for a mistake (assuming you filed and paid on time) is much lower, see the next section, "Accuracy-Related Penalties," on the first link you posted: https://www.irs.gov/payments/penalty-relief-for-reasonable-cause#Accuracy-Related_Penalties https://www.irs.gov/payments/penalty-relief-for-reasonable-c...
    - deleted 3y ago
      [deleted]
    - junar 3y ago
      At the very least, I'm going to contend that it's not a DIY thing. It's something that you should hire a tax pro for, so they can properly assess your situation and present your case. > In a number of recent Tax Court cases, taxpayers have raised the argument that they relied on Turbo Tax software as a defense to the imposition of the accuracy-related penalty. With one notable exception, the so-called “Turbo Tax defense” has been rejected by the Tax Court. https://scholarlycommons.law.wlu.edu/cgi/viewcontent.cgi?article=1368&context=wlufac https://scholarlycommons.law.wlu.edu/cgi/viewcontent.cgi?art...
      - dpifke 3y ago
        Many years ago, I screwed up my AMT calculations pretty badly, arguably because the instructions for Form 6251 suck. I was off by several thousand dollars, the difference between a big refund and a big amount due. I didn't have to hire anyone to get the penalties waived; I just submitted a letter explaining my original rationale, along with an amended return fixing the problem and a check for the correct tax. The IRS was completely reasonable about it. Edit to add: But then again, I do my own plumbing repairs. Heinlein didn't list taxes in one of my favorite quotes from him, but he should have: "A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects."
gnulinux 3y ago
Unfortunately, this is the fantasy but it's not the reality for some Americans. USA is a very complex country where blanket statements like this can be so far from the truth for some that you'd be surprised. Tax education in our country is next to 0 but our taxes are extremely complicated. Many Americans have non-USA ties (even some Americans who lived in the USA their entire lives can have family members outside the country, but definitely Nth generation immigrants and recent immigrants) and what you said is not true if non-USA finances (bank accounts, inheritance, income etc) are involved. It is possible to make a tiny honest mistake and have to face huge $$$ penalty consequences. Such as FBAR, Form 8938, Form 3520 to name a few, these are things almost no American knows but if your grandpa from Mexico dies and you don't report his property in Form 3520 you may be billed up to $100k penalty. Sure, if this was an honest mistake they'll waive this penalty but not always and certainly not without a tax lawyer fighting for you. Now you need to hire a CPA and a tax lawyer and this is not cheap. I personally find it misleading to undersell how high stakes taxes are in the US. Sure for 95% of the people if you make a tiny honest mistake nothing will happen, but it's not like a small error in your taxes can't cause a huge ordeal. I tell my friends, taxes are an extremely high stakes deal and you need to understand what's happening on those papers and IRS website. I'll tell my kids the same once they're of age to understand.

dpifke 3y ago

They're even required to waive the penalties if you "acted with reasonable cause and good faith": https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR1d0453abf9d86e0/section-1.6664-4 https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A...

junar 3y ago
"Reasonable cause" is a pretty hard bar to meet. [1] > The following factors don't generally qualify as valid reasons for failure to file or pay a tax on time: > Lack of knowledge. You're responsible for knowing or getting advice on how to file returns and pay or deposit taxes on time. This includes filing requirements, deadlines and amounts you owe. > Mistakes and oversights. You're responsible for making sure your tax returns, payments and deposits are correct and on time. In certain cases, reasonable cause may apply to a mistake if additional facts and circumstances show that you tried to comply with tax law. A much easier path is first time abatement. [2] Though of course as the name indicates, it can't be used multiple years in a row. [1] https://www.irs.gov/payments/penalty-relief-for-reasonable-cause https://www.irs.gov/payments/penalty-relief-for-reasonable-c... [2] https://www.irs.gov/payments/penalty-relief-due-to-first-time-abate-or-other-administrative-waiver https://www.irs.gov/payments/penalty-relief-due-to-first-tim...
- dpifke 3y ago
  That's for failure to file or pay on time. The bar for a mistake (assuming you filed and paid on time) is much lower, see the next section, "Accuracy-Related Penalties," on the first link you posted: https://www.irs.gov/payments/penalty-relief-for-reasonable-cause#Accuracy-Related_Penalties https://www.irs.gov/payments/penalty-relief-for-reasonable-c...
  - deleted 3y ago
    [deleted]
  - junar 3y ago
    At the very least, I'm going to contend that it's not a DIY thing. It's something that you should hire a tax pro for, so they can properly assess your situation and present your case. > In a number of recent Tax Court cases, taxpayers have raised the argument that they relied on Turbo Tax software as a defense to the imposition of the accuracy-related penalty. With one notable exception, the so-called “Turbo Tax defense” has been rejected by the Tax Court. https://scholarlycommons.law.wlu.edu/cgi/viewcontent.cgi?article=1368&context=wlufac https://scholarlycommons.law.wlu.edu/cgi/viewcontent.cgi?art...
    - dpifke 3y ago
      Many years ago, I screwed up my AMT calculations pretty badly, arguably because the instructions for Form 6251 suck. I was off by several thousand dollars, the difference between a big refund and a big amount due. I didn't have to hire anyone to get the penalties waived; I just submitted a letter explaining my original rationale, along with an amended return fixing the problem and a check for the correct tax. The IRS was completely reasonable about it. Edit to add: But then again, I do my own plumbing repairs. Heinlein didn't list taxes in one of my favorite quotes from him, but he should have: "A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects."

gnulinux 3y ago

Unfortunately, this is the fantasy but it's not the reality for some Americans. USA is a very complex country where blanket statements like this can be so far from the truth for some that you'd be surprised. Tax education in our country is next to 0 but our taxes are extremely complicated. Many Americans have non-USA ties (even some Americans who lived in the USA their entire lives can have family members outside the country, but definitely Nth generation immigrants and recent immigrants) and what you said is not true if non-USA finances (bank accounts, inheritance, income etc) are involved. It is possible to make a tiny honest mistake and have to face huge $$$ penalty consequences. Such as FBAR, Form 8938, Form 3520 to name a few, these are things almost no American knows but if your grandpa from Mexico dies and you don't report his property in Form 3520 you may be billed up to $100k penalty. Sure, if this was an honest mistake they'll waive this penalty but not always and certainly not without a tax lawyer fighting for you. Now you need to hire a CPA and a tax lawyer and this is not cheap. I personally find it misleading to undersell how high stakes taxes are in the US. Sure for 95% of the people if you make a tiny honest mistake nothing will happen, but it's not like a small error in your taxes can't cause a huge ordeal. I tell my friends, taxes are an extremely high stakes deal and you need to understand what's happening on those papers and IRS website. I'll tell my kids the same once they're of age to understand.