IRS penalty abatement is a provision to remove IRS penalties for late filing and late payment. If a taxpayer has a reasonable cause for non-compliance, they can apply for the relief. If the taxpayer qualifies, the IRS removes some or all of the penalties. An IRS penalty abatement, however, does not reduce the underlying tax; it only removes the associated penalties. In all cases, taxpayers need to have a just reason to backup their request for an IRS penalty abatement. Let’s dig deeper to find out all you need to know about IRS penalty abatement.
Grounds for IRS Penalty Abatement
The IRS entertains a penalty abatement application only if the taxpayer is able to prove that the late filing or late payment was due to certain circumstances that were beyond their control. That’s why the IRS approves only a handful of penalty abatements that involve a significant disruption of life. They include:
- Serious illness
- Death in the family
- Destruction of records
- Delay or error in IRS tax assessment
First-Time Penalty Abatement
The IRS has the provision of First-Time Penalty Abatement (FTA) for taxpayers with a good track record of tax compliance. If a taxpayer receives penalties for late payment or any other failure to meet tax obligations for the first time, they may qualify FTA. It is however important to note that the program is not meant for repeat defaulters, as the IRS will not consider the request in such cases. In addition, it is always advisable to have an experienced IRS attorney help you file your request.
Abatement for Incorrect Advice
When a taxpayer receives penalties because of receiving an incorrect written or oral advice from the IRS, they can apply for an IRS penalty abatement. It is, however, rare for written advice from a CPA or tax professional to result in such a scenario. Most tax professionals have disclaimers in the their emails and letters stating that their work cannot be used to challenge tax penalties or interests. While taxpayers can sue their tax persons for erroneous advice, it is unlikely for the IRS to reduce or remove the penalties.
Application for Tax Abatement
A taxpayer can apply for an abatement by filling Form 843, providing a clear description of their reason for non-compliance. Remember that the IRS penalty abatement is not based on a taxpayer’s ability or inability to pay taxes, interest, or penalties; it is solely based on the ground of “fairness”. If a taxpayer is unable to pay their debt, they can always request an Installment Agreement, Offer in Compromise, or other provisions available in the IRS Fresh Start Initiative.
Whenever taxpayers a face situation involving tax penalties they think are unjust, it is advisable to hire an IRS tax attorney, who can gather the requisite tax records and present proof to the IRS as to why the penalties received should be removed. The Law Offices of Nick Nemeth in Dallas, Texas has a team of IRS tax lawyers and professionals specialized in dealing with all forms IRS tax issues, and helping taxpayers reduce their tax liabilities. To schedule a consultation with one of our IRS tax lawyers, simply call (972) 627-4580 or fill out our contact form and we will contact you shortly.