Q: How to stop tax penalty and get the abatement for the tax liability?
I have $1.802 mil tax liability from my short term tax gain in 2020. I am tax illiterate so I rely solely on my CPA to advise me what should be done. From my CPA’s neglect on my case, I am being charged penalty + interest at $60+ k a month. I have been trying to sell my apartment valued at $1.7 mil for the past 4-5 months but the market took a down turn and I am still not able to. I do everything in good faith to settle the liability but I will be beyond stretched and bankrupt with the penalty. How do I stop the penalty while I am trying my best to sell the apartment to settle the tax?
A: Unfortunately penalties and interest will continue to incur until the tax debt is paid in full; it is typically just reduced by the % amount. It might be worth engaging a professional to draft a penalty abatement request on your behalf, as these things do usually require some negotiations with the taxing authorities. Another thing that might help is engaging a tax firm to review your 2020 return to assure everything is accurate. If something is incorrect an amended return can fix it and possibly reduce the overall tax due.
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