• August 29, 2023
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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 or file the taxes they owe, the obligation doesn’t cease to exist; it continues to accumulate interest and even penalties. Though the IRS continually tries to recover outstanding tax debt, it may agree to cut down on or waive tax penalties if a taxpayer is able to provide a satisfactory reason for their non-compliance. Read on to learn more about requesting an abatement of IRS penalties.

IRS Penalties Eligible for Relief

IRS penalty abatement is a provision for the removal of certain IRS penalties. If you believe that you shouldn’t be required to pay certain federal penalties, you may apply for IRS penalty abatement. If your request is approved, the IRS will remove all of your penalties. If you want to apply for penalty abatement, you can contact the Law Offices of Nick Nemeth. The penalties eligible for relief are divided into three categories:

  • Failure to file tax return: This is the penalty for filing taxes late. A failure to file penalty may apply if you do not file by the tax filing deadline.
  • Failure to pay taxes on time: This is a late tax payment penalty that may apply if you do not pay all the taxes you owe by the tax filing deadline.
  • Failure to deposit certain taxes as needed or penalty for not paying taxes

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

How to Calculate

Although both the penalties (penalties for not paying taxes and penalties for not filing taxes on time) are capped at a maximum of 25% of the unpaid tax, they are calculated differently. The Failure-to-File penalty is generally 5% of the unpaid tax for each month by which the return is late. The Failure-to-pay penalty is generally 0.5% of the unpaid tax for each month it is late. The IRS will assess penalties for partial months. If, for instance, one owed $100,000 on their individual income tax return and filed an extension but paid the total by October 15, the penalty would be approximately $3,000. If, however, in the same scenario, the taxpayer does not file an extension, the failure-to-file penalty may be capped, resulting in a much higher IRS liability.

Types of IRS Tax Penalty Relief

Unlike what many people think, the IRS isn’t an arbitrary tyrant, deaf to all reason. In fact, they’re quite open to hearing your case and reconsidering their original penalty ruling.

Can you get a penalty waiver and be in the clear once again? It depends. If you have a “reasonable cause” for failing your taxing duties, you can be eligible for the “first-time penalty abatement (FTA)”, also called simply IRS penalty abatement

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

1. Reasonable Cause

The most common causes of IRS tax penalties are also eligible for tax penalty abatement. Such cases include not filing your taxes or being unable to pay them by the set due date.

But, simply wanting these tax penalties to disappear isn’t enough. You have to show the IRS that you had a legitimate reason, or, in legal terms, reasonable cause, for not complying with your taxing duties.

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 was unable to do so because of uncontrollable circumstances.

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

  • Natural Disaster

Were your records and other important documents destroyed or lost during a fire, flood, or another natural disaster? This is a good enough reason for the IRS to waive your penalties.

  • Social Unrest

Were you unable to leave from your home or job because streets were blocked off by a riot, manifestation, or crime scene? The IRS considers these cases serious disturbances that can prevent you from complying with your tax obligations.

  • Physical Confinement

The IRS can’t blame you if being absent from your taxing duties was unavoidable. After all, how can you pay taxes if you are in a coma in the hospital or held hostage abroad? The IRS isn’t an evil monster and will be understanding of these extreme-case scenarios.

  • Death of a Family Member

This one is self-explanatory. It’s impossible to go out and pay your taxes if you are dead. Another huge factor the IRS takes into account is having an immediate family member who took care of finances pass away.

If you have a valid reason for not paying or filing your taxes, then you are eligible for an IRS penalty abatement. But, before it is granted to you, you have to prove your case. This involves providing all the additional information necessary to evaluate your case.

You should provide any document that can work as evidence and clear up all surrounding circumstances. The IRS will also consider your history and whether this is a first-time or repeat offense.

At the end of the day, a tax law attorney will be your best resource in determining whether your situation is fit for penalty abatement. Seek consultation for the best IRS tax problem resolution.

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 the failure-to-pay penalty.

Related Blog: 6 Must-Know Facts about Penalties on Late Filing and Late Payments

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 performing 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, an 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

2. 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 an administrative waiver if they received any incorrect verbal advice from the IRS, which led to the non-compliance.

3. Statutory Exception

A taxpayer may qualify for a statutory exception if they received 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 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 IRS charges interest on all unpaid balances. Interest accumulates daily and is charged until the balance is paid or settled. If any of the tax and/or penalties are reduced, the IRS automatically reduces the related interest. Interest is statutory and cannot be reduced or removed for reasonable cause or as a first-time abatement. The only way that the IRS will reduce the amount of interest that you owe is if the interest is due to an unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act. To check if you qualify for interest abatement, you should consult with an IRS tax attorney like The Law Offices of Nick Nemeth.

The Final Word

The IRS provides tax abatement for certain tax penalties, primarily in cases where it is impossible for a taxpayer to file their tax return or pay their taxes. Barring an FTA (or other administrative waiver), all types of provisions require a reasonable cause, supported by relevant documents and proof. It is best to take help for such IRS tax problems from a law attorney. If you are seeking resolution for abatement, penalty or any other tax debt problems, request help from the experienced IRS tax attorneys in Dallas at the Law Offices of Nick Nemeth. For a free, no-obligation consultation, simply call (972) 426-2991 or fill out our contact form, and we will take it from there.

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What Our Clients Have to Say

Brent VahleBrent Vahle
19:13 02 May 24
I called to see if they could help reduce some penalties and fees. The person I spoke with told me it might be counterproductive for them to take my case since their feels would likely equal the amount of penalty/interest abatement. I decided to pass on moving forward but was so happy to hear a legal team, or any business for that matter, who has that much integrity. I feel most others would likely try to take my money anyway. I hope I never have to go through this again, but if I do, I will definitely use the Law Offices of Nick Nemeth!
Jason WinkleJason Winkle
18:44 02 May 24
Jaime Flores was very friendly, professional, and knowledgeable. She gave me some very valuable information which helped guide me with a plan of action. The free consultation is very much appreciated.
Matthew SwigartMatthew Swigart
12:14 02 May 24
Great attorney who was able to provide quick and useful advice. Although my situation did not warrant their services, they still took the time to discuss solutions I could explore. I highly recommend visiting this office!
Tony PantojaTony Pantoja
12:57 09 Apr 24
Very professional and very knowledgeable, Jamie Flores was very straight forward and professional, a firm that doesn’t just take your money, Thanks
Carla AtwalCarla Atwal
10:52 02 Apr 24
Nick was wonderful in guiding me with direction on some tax questions I had. He was concise, and to the point, and was happy to provide general info to me at no charge. I truly appreciate him and would highly recommend him.
Miguel AlvaradoMiguel Alvarado
15:56 25 Mar 24
By far the best attorneys I have ever worked with. They’re are very helpful and supportive from day one. They went above and beyond to make sure all my documents were submitted on time and gave updates as soon as they received them. I cannot name a single flaw in their work. Their team of assistants are very professional and seem to all be on the same page. I’ve made multiple phone calls and sent a ton of emails to their staff and they were able to help me all through the course of the case. I cannot express my gratitude enough for how excellent they handled my case.
Lucy FoyLucy Foy
06:55 19 Jan 24
My first appointment I had with, Tax Attorney Nick Nemeth, gave me such a sense of relief. He listened and gave me his professional advice, Mr Nemeth took my case. I was well kept updated, by phone calls and letters. That really impressed me and gave me so much confidence in them. The case went on for a couple of months. The day I received the call from one of his team members Kyle, informing me that the case was resolved and that I owed absolutely nothing to the IRS, I was overwhelmed with joy. I would recommend this law firm to anyone that needs help, with any tax issue. Thank you, to the Law Firm of Attorney Nick Nemeth and his team.
Bradley RunyonBradley Runyon
20:17 13 Jan 24
I received a tax bill in the mail from the IRS last year in 2023. The fees and penalties I owed were something I myself could not afford. I reached out to Nick Nemeth's firm and received the best experience you could imagine. The team was professional, educational, and fast. If you have a tax issue with the IRS using another firm other than Nick Nemeth's would be an error in judgment. I would recommend their services above others.
Sue HulsemanSue Hulseman
19:55 11 Jan 24
Working with Nick Nemeth and his team to resolve my debt with the IRS was the best decision I could have made. I felt such relief knowing I didn’t have to deal with the IRS myself. They did a wonderful job and were responsive to my questions and kept me abreast of my case. My outcome was exactly what I was hoping for. I strongly recommend using them if you have an issue to resolve with the IRS.
20:53 21 Dec 23
I had an incompetent tax preparer, who also ignored several notices from the IRS, which in the end resulted in a lien on my property. I did not know what to do and an attorney friend recommended that I contact the Nick Nemeth Law Offices. I met with Jamie Flores and Ivan Nalbantov in December 2021 for a free consultation, and right away was impressed by their thorough examination of my paperwork and extensive knowledge of IRS tax laws. I felt not pressured and appreciated their advice and in the end decided that I would pursue resolving the issue by myself. I paid the IRS Civil Penalty and, as recommended also submitted a letter to the IRS requesting a refund and explaining what happened. I am glad to report that my persistence finally paid off. My case took two years to resolve and I finally received a full abatement/refund check from the IRS in December 2023. I could not have done this without the straightforward recommendation of Jamie and Ivan; and I highly recommend the Nick Nemeth Law Offices to anyone needing help with the IRS.
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!
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In observance of Memorial Day our office will be closed on 5/27/2024.Have a safe holiday weekend. We will re-open Tuesday 5/28/2024 at 7:00a.m.
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