You open your mailbox, and there’s a letter, from the I…. R….S! Questions start racing in your mind. How did they find me? What does this letter mean? Am I going to be able to afford this? When do I have to pay them? Who can help me fix this?
You’d be surprised how many musicians can’t pay taxes when they’re due. Some of the most painful and expensive fees from the IRS are usually failure-to-pay penalties which can be up to 25% of the tax you owed. Of course, the best way to avoid IRS penalties is to not let them happen in the first place.
Here’s how I negotiated a musician out of $1,560 of penalties from the IRS for not filing their tax return on time.
This was the first year this band had set themselves up as a business. Their “old” CPA set up a corporation for them and then ditched town so they simply didn’t file and a year later needed help. After I filed their return, they received a notice saying the tax return was late, so I called to get it waived.
The truth is, if you forgot to file, or couldn’t pay when the tax was due, you can get the IRS to waive your penalties too. Let me show you how, but you’ll need to grab some information first:
Before you call the IRS to get your penalty fees waived:
- Have your social security number or music business EIN ready
- Have a copy of the IRS notice
- Have a copy of the return you filed late
- Know your filing status (single, head of household, married jointly, married separately)
- Know the tax form that was filed (1040, 1065, 1120S)
- You need to have all returns filed
Can you get IRS fees waived if you didn’t file your band’s tax return on time? Yep – here’s how
IRS AGENT: Internal Revenue Service, this is Mr. AGENT, ID Number: XXXXXX, how may I help you today?
ALEXIS: Hi, [band] received a letter in the mail charging a penalty for filing the 2015 tax return late, and I’d like to have it waived.
IRS AGENT: (After asking you some identity verification questions) I see the penalty, let me see here, unfortunately, we’re not able to waive that fee, because the return was filed on (late date you filed your return), therefore, we can’t waive the fee blah, blah, blah.
What you don’t want to say to an IRS agent:
“If you can’t waive it, will you at least reduce the fee?”
You don’t want a reduction, you want forgiveness, don’t settle yet.
“Is there anything else I can do, like set up a payment plan for the penalty?”
Imagine you’re the IRS agent speaking, it would make your job easier to say yes; you can setup your payment agreement on IRS.gov.
“Well, I read an article online that said you could.”
I’d roll my eyes at you too.
Don’t give up if the IRS agent’s first response is “no.”
When you call the IRS to lower your penalty, say this:
ALEXIS: “Well, it’s my [musician’s] first time making this type of mistake with their taxes, I’d like to get it waived. Can they take advantage of the “first time penalty abatement”?” (Yes, use those exact words.)
IRS AGENT: “Let me take a look at the account. Is it okay if I put you on a brief hold…”
[After listening to 3 long minutes of the same IRS hold music]
IRS AGENT: “It looks like I can waive the penalty this one time. The band will receive a letter in the mail within 7-10 business days showing the failure-to-file fees have been removed. However, this can’t happen again because this is the only time we will offer this courtesy. All returns in the future need to be filed on time. May I help you with anything else today?”
- Mistakes happen, but don’t let it happen again because I guarantee they won’t waive the fees again.
- The initial response may be “no” but don’t fear. Ask for the “first time penalty abatement.”
- The IRS will only allow the waiver for ONE YEAR, if you haven’t filed in a looooooong time, you’re stuck.
Pro tip: Set up calendar reminders for when your tax return is due and keep track of your expenses.
The IRS understands that we are occasionally forgetful and they’ll waive a first-time fee, if you ask. After the first time, it’s near impossible, but can still be done if you have a REALLY good excuse. Remember: the IRS agent is not out to get you and a well done phone call can often make a difference.
Try calling the IRS to get your fees waived today (their phone # is 1-800-829-1040).
P.S. This will work even if you already paid the fees, they’ll send you a refund check. You’re welcome.
Author bio: This article was written by Alexis M. Kimbrough a music accountant and business manager at Growth Group. Alexis helps musicians get financially organized and grow their businesses. After working with Alexis, artists are able to fund their own albums, pay themselves a salary, and are on top of their taxes.
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