IRS Tax Penalties
  • November 4, 2019
  • admin
  • 0

The IRS is always on the lookout for defaulters and has the right to take action against them as per the law. When a taxpayer is unable to pay what they owe, the obligation doesn’t cease to exist; it rather continues to accumulates interest and even penalties. Though the IRS continually tries to recover outstanding tax debt, it may agree to cut down or waive tax penalties and interest if a taxpayer is able to provide a satisfactory reason for their non-compliance. Read on to learn more about requesting a waiver of IRS tax penalties and interest.

Penalties Eligible for Relief

The penalties eligible for relief are divided into three categories:

  • Failure to file tax return
  • Failure to pay taxes on time
  • Failure to deposit certain taxes as needed

Note: The IRS might consider other types of penalties depending upon the intricacies of the case.

Related Blog: Know Your Appeal Rights before Going Against the IRS

Types of IRS Tax Penalty Relief

The IRS provides the following three primary types of tax relief:

Reasonable Cause

As the name suggests, a reasonable cause for tax relief should be a reason that is purely objective. The IRS should be convinced that the taxpayer wanted to fulfill their Federal tax obligations, but were unable to due to uncontrollable circumstances.

Some of the reasons that could pass as a “reasonable case” include:

  • Fire, natural disaster, casualty, or other such disturbance beyond anyone’s control
  • Inability to obtain financial records
  • Death, critical disease, incapacitation, or unavoidable absence of the taxpayer or an immediate family member

Note: While lack of funds cannot be cited as a reasonable cause for failure to file or pay on time, it fulfills the reasonable cause criteria for failure-to-pay penalty.

What does the IRS Require?

Here are some of the facts that might be required by the IRS to determine reasonable cause:

  • What happened and when?
  • What facts and circumstances kept the taxpayer from filing their return or paying their tax on time?
  • How did the facts and circumstances prevent the taxpayer from filing their return and/or paying their taxes or perform other routine duties?
  • Once the facts and circumstances changed, what actions did the taxpayer take to file and/or pay their taxes?
  • In the case of a Corporation, Estate or Trust, did the affected taxpayer or a member of his immediate family have complete authority to execute the return or make the deposit or payment?

Related Blog: IRS Tax Problems a Debt Attorney Can Help You With

Documents Required

The documents accepted by the IRS in support of a reasonable cause claim include:

  • Hospital or court records or a letter from a physician to prove illness or incapacitation, with specific start and end dates
  • Documentation of natural disasters or other events that prevented the taxpayer from filing or paying tax

First Time Penalty Abatement

If a taxpayer has missed filing or paying their taxes for the first time, they may qualify for First-time Penalty Abatement (FPA). A taxpayer may qualify for FTA if they:

  • Wasn’t required to file a return earlier
  • Have no penalties for at least the last 3 tax years
  • Have filed all currently required returns or filed an extension of time to file
  • Have either paid or arranged to pay the due tax amount

Note: Taxpayers can claim administrative waiver if they received any incorrect verbal advice from the IRS, which led to the non-compliance.

Statutory Exception

A taxpayer may qualify for a statutory exception in case they received an incorrect or erroneous written advice from the IRS. In such a case, they are required to furnish the following documents to support the claim:

  • A written request for advice
  • The erroneous written advice they relied upon
  • The report, if any, of tax adjustments identifying the penalty or addition to tax, and the item(s) pertaining to the erroneous advice

Besides the above measures for tax relief, the IRS Independent Office of Appeals, also called the IRS Office of Appeals, can also be approached by a taxpayer for getting resolution regarding any tax dispute. The IRS Independent Office of Appeals is an autonomous organization within the IRS that assists taxpayers in resolving their tax disputes through an informal, non-litigation, administrative process.

Regarding Interest Relief

The IRS does not provide any interest relief, as such, because there is no law supporting it. Nevertheless, interest can be reduced if some tax penalties are waived.

The Final Word

The IRS provides tax waivers for certain tax penalties, primarily in cases wherein it was impossible for a taxpayer to file their tax return or pay their taxes. Barring FTA (or other administrative waiver), all types of provisions require a reasonable cause, supported by relevant documents and proof. If you are also seeking a tax abatement or penalty relief, speak with the IRS tax lawyers at the Law Offices of Nick Nemeth. For a free, no-obligation consultation, simply call (972) 426-2553 or fill out our contact form and we will take it from there.

Please follow and like us:

What Our Clients Have to Say

Susan WilsonSusan Wilson
03:27 25 Jan 23
I have been very pleased with the solid counsel and guidance that Nick Nemeth has provided me regarding my tax issue. I found him to be honest and straightforward which I appreciated. I was impressed with his relevant experience and knowledge . He has definitely brought me peace of mind during a difficult and stressful time.
Sarah HowardSarah Howard
03:44 14 Nov 22
I would like to thank Mr. Nick and his staff for the superb help that I received from them. My IRS problem was resolved quickly and efficiently. It took 2 visits to convince me that I was over my head. I thought that I could call the IRS, appeal my tax notices and settle on a payment plan on my own. After many phone calls to the IRS, waiting sometimes more than 4 hours with no resolution to speak of, it proved to be extremely difficult and stressful. Revisiting Mr. Nick was a huge wake up call. My account was reviewed, and a payment plan was established with the IRS within a week. I will be forever grateful to the staff who worked on my case and especially to Lorna who listened to me vent while going through this painful process.
00:33 07 Aug 22
I cannot say enough good things about Nick and his team. When I first met with Nick he was up front, honest, friendly and efficient. When I worked with one of his attorneys, Eric B, I was just as pleased. All of the staff there are nice and very helpful. I wish I hadn't waited so long to get help with my issue. Over 6yrs I tried getting through and getting anywhere with the IRS and hardly made any progress. I know this may not be the case for all, and even I thought it would take longer than it did, but 3mos and they had my situation straightened out. I still can't believe it. Thank you thank you THANK YOU for all that you did for me. This is a huge burden gone out of my life now thanks to you. If anyone needs help out there, I know you may not want to shell out more money to get their help but it may just save you in the long run.
Spoilly GirlSpoilly Girl
23:49 03 Aug 22
The Nemeth Law team is exceptional. They treat their clients like a family member who is in crisis. They want you to get the best possible outcome. I really appreciate everything that they did for me. Jake and Ashley had the greatest role in my case and it all turned out for the best for me. Thank you Nick and team for easing my fears and getting me through the long process. I'm truly grateful.
Eddie WaltEddie Walt
19:44 12 Jul 22
During a time in which competent, professional service at a fair price seems to have disappeared, Mr. Nemeth and his team are a refreshing breath of fresh air.From my first phone call to the final settlement of our case with a non-responsive IRS, they under-promised, over-delivered and were in constant courteous contact to make sure we knew exactly what was happening and where we stood.I hope to never need their services again, but, should I receive another friendly letter from the IRS...I know who to call!
Quick Inquiry


    Enter the text you see above