What If The IRS Denies My Request For The Abatement Of Penalties?

 Appeal it. The sooner the better. If you've requested a Penalty Abatement from the IRS and it's been rejected, you may Appeal the IRS decision to reject your request. The rejection letter you receive from the IRS will direct you on how to Appeal the denial and where to send your Appeal. The IRS rejection letter should also tell you why your request was denied and it may give you a deadline date to Appeal.

In your Appeal, focus on the facts surrounding the circumstances that caused the accrual of the tax debt. The more detail and backup documentation you provide, the better chance you'll have at winning your Penalty Appeal.

What Happens During An IRS Penalty Appeal?

You can expect an informal phone call or meeting with your IRS Appeals Settlement Officer. Your IRS Penalty Appeal may be held in person or over the phone. Your Settlement Officer will consider your request and the circumstances surrounding the accrual of your tax debt, comparing your reasons to the Internal Revenue Code and Manual, and tax court case law that may apply to your case.

You will be given the opportunity to plead your case, so you need to be prepared with specifics, such as dates, names, backup documents and anything else that supports your reasoning. Here are a few questions you should be prepared to answer:

• Does the timeline of your circumstances align directly with the tax accrual period?
  
• What did you do to remedy the problem?
  
• How and why was the problem out of your control?
  
• If you owe more than one period or year of tax, why were you unable to resolve the problem?
  
• If your circumstances only caused a lack of funds to pay the tax, why wasn't your return filed on time?
  
• Why didn't you make smaller payments, even though it wouldn't have paid the tax in full?
  
• What hardships did you suffer?
  
• Were other creditors not paid? And, do you have any shut-off or collection notices from other creditors?
  

What Happens If My IRS Penalty Appeal Is Denied?

If your IRS Appeals Settlement Officer denies your abatement request, you will be issued a determination letter with further appeal rights. You will have 30 days to Appeal to tax court, and you can do this yourself without an attorney.

If you truly believe that the reasons for the accrual of your IRS tax penalty were out of your control, or that you would have suffered a hardship had you paid your tax timely, then I suggest you go to tax court. Sometimes the IRS will settle due to the hazards of litigation. And other times the Services will simply cut its losses and abate your penalty, if that option proves to be more cost effective than squaring off against you in tax court.