The IRS may waive interest on an individual taxpayer’s late payment of a tax liability under what circumstance?
options: a) The payment was less than 30 days late. b) The IRS caused the delay in payment. c) All of these. d) The late payment was under $1,000. e) The taxpayer relied on a competent tax professional for determining the due date.
The correct answer and explanation is:
The correct answer is b) The IRS caused the delay in payment.
The IRS may waive interest on an individual taxpayer’s late payment of a tax liability under certain circumstances. One of the situations where the IRS will waive the interest is if the delay in payment was caused by an action or error on the part of the IRS itself. This could include situations where the IRS failed to send the correct notices or caused confusion in the processing of payments or refunds.
The IRS generally does not waive interest for reasons outside of its own actions. For example, if a taxpayer is late with a payment but the cause is due to personal issues, financial difficulties, or reliance on incorrect advice from a tax professional, the IRS is unlikely to grant a waiver. It is important to note that the IRS does have some flexibility in applying penalties and interest, but waiving interest on late payments is a rare exception that is typically reserved for cases where the IRS has made an error that directly contributed to the taxpayer’s delay.
In the case of other options:
- Option a) “The payment was less than 30 days late” is not a valid reason for the IRS to waive interest. The length of the delay does not determine whether interest will be waived.
- Option c) “All of these” is incorrect because only the situation where the IRS caused the delay applies.
- Option d) “The late payment was under $1,000” is also incorrect because the amount of the payment does not affect whether interest is waived.
- Option e) “The taxpayer relied on a competent tax professional for determining the due date” is not sufficient grounds to waive interest. While taxpayers can rely on professionals, they are still responsible for timely payments.
Taxpayers who believe they should not owe interest may request an abatement of interest, but they must show clear evidence that the delay was due to IRS actions.