Notable Dos and Don’ts When Applying for IRS Penalty Abatement

IRS penalties can be a nightmare for taxpayers. Making the scenario worse is the fact that most penalized taxpayers either do not request relief or have their abatement request turned down because they failed to comply with the IRS’s filing guidelines. That is the reason why it is important for taxpayers to rope in an experienced IRS tax lawyer. With proven experience in handling IRS penalty abatement cases your tax attorney can help you earn a determination in your favor. In this article we cover some notable dos and don’ts when applying for IRS penalty abatement. Read on.


Utilize First-time Penalty Abatement Relief

Before considering reasonable cause abatement taxpayers should always consider that first year failure-to-file (FTF) and failure-to-pay (FTP) penalties qualify for First-time Penalty Abatement (FPA) relief, provided the taxpayer meets a few other requirements. To be eligible, you must have filed all required returns, paid all taxes due or be in an IRS agreement on the outstanding balances, and you must not have received any IRS penalties in the 3 years prior to the year the penalty was assessed against.

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Show Prior Compliance

IRS Policy Statement 20-1 states that the primary intent of IRS penalties is to deter noncompliance. It is therefore imperative that taxpayers who are planning to request penalty abatement are able to showcase and prove their prior year tax compliance. If a taxpayer has received any penalties in prior years, then they must have a reasonable clause for the noncompliance.

Consider Placing a Written Request

Many taxpayers call the IRS to request penalty abatement; this can work in the cases that qualify for FTA but it is not the ideal approach for reasonable cause abatements. In those cases, the taxpayer should fill out ‘Form 843: Claim for Refund’ to request penalty abatement and they should attach all available evidence that can support their reasonable cause claim.

Include All Essential Items

When preparing to request IRS penalty abatement, make sure you are clear about the circumstances that were beyond your control that caused the noncompliance. This could be an illness, incapacitation, loss of records, or other similar reasons. Make sure you attach all essential items to support your reasonable clause claim and be sure to show how other aspects of your life were affected by the situation.


Don’t Pay the Penalty

If you pay the penalty before requesting reasonable cause, it may remove an important avenue of IRS appeals: The Collection Due Process (CDP) hearing. If you have an unpaid balance, you can place a request for a CDP hearing on an unpaid penalty. During the hearing, the IRS thoroughly considers your penalty abatement request, which increases the likelihood of an abatement approval.

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Don’t Just Blame it on the Tax Pro

The IRS may only need one reason to grant a request for reasonable cause abatement, but the IRS can deny a request for any number of reasons. If the abatement request blames a Tax Professional as the only cause for a failure to file then your average taxpayer is unlikely to get a beneficial response from the IRS. With all the tools available to the public the ‘bad tax pro’ argument is an uphill battle. Furthermore, don’t just complain to the IRS that it will be difficult to pay. Consult with an IRS tax attorney to present the best case to the IRS that doesn’t just show but rather proves to the IRS that you really are unable to pay the penalty.

Don’t Delay, Hire an IRS Tax Attorney

While there is no time limit to request a reasonable cause abatement of the FTF or FTP penalty, waiting too long can reduce or even eliminate the benefit of doing so. If you have paid the penalty and balance due for a given year and then you request RCA, you could get a refund in the amount of the penalties abated. If you wait too long though, that check may be out of your grasp forever. If you have questions about the specifics on this then reach out to the Law Offices of Nick Nemeth as soon as you can

Wrap Up

When applying for an IRS tax penalty abatement, a taxpayer has to consider a number of factors and should be in a position to fully comply with the filing guidelines prescribed by the IRS, which calls for professional expertise. That is the reason why it is always advisable to rope in a trusted and experienced Dallas tax attorney with proven expertise in abatement of penalties and interest. If you are looking for such an expert, the search ends at the Law Offices of Nick Nemeth. Contact us today for a free, no-obligation consultation. Simply call (972) 426-2553 or fill out our contact form and we’ll get back to you as soon as possible.

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