Why Does the IRS Charge Penalties?The IRS uses penalties to encourage voluntary taxpayer compliance. Some of the more common penalties are:
- Accuracy Related Penalty
- Failure to Timely File Penalty
- Failure to Timely Pay Penalty
- Federal Tax Deposit Penalty
- Underpayment of Estimated Tax Penalty
- Trust Fund Recovery Penalty
Will the IRS Remove Penalties From My Tax Debt?If you meet certain criteria, the IRS will consider the reduction or removal of the penalties assessed to your account. Use Internal Revenue Manual section 20.1 as a guide to help you determine whether or not you qualify for IRS penalty abatement. Many delinquent taxpayers qualify for penalty reduction under IRS Reasonable Cause criteria. Here are a few of them:
- Ordinary Business Care and Prudence - Did the taxpayer make provisions for business obligations to be met when reasonably foreseeable events occur? Were there circumstances beyond the taxpayer's control?
- Death, Serious Illness, or Unavoidable Absence of the taxpayer or an immediate member of the taxpayer's family;
- Fire, Casualty, Natural Disaster or Other Disturbance;
- Taxpayer Unable to Obtain Records;
- A Mistake Was Made - Although not an acceptable reason on its own, this may be used as a supporting factor;
- Erroneous Advice or Reliance - Although rarely an acceptable reason on its own, Erroneous Advice or Reliance on a third party may help to support another position. This contention may stand on its own if the advice is in writing from the IRS;
- Ignorance of the Law - A taxpayer may not have been aware of their specific tax responsibilities to file and pay, although a reasonable effort to determine their tax responsibility was made prior to the non-compliance issue;
- Undue Hardship – A delinquent taxpayer must prove that an undue hardship would have been suffered if the tax would have been paid timely.
How Do I Request the Abatement of IRS Penalties?In some cases, you can call the IRS and request the abatement of a penalty. This technique usually works best in cases that involve one tax period with one or two penalty types.
In other cases, you may use IRS form 843 to request the abatement of tax penalties. The form, found at irs.gov, also provides instructions on how to complete it. However, be prepared to write a detailed description of the circumstances that caused the nonpayment of the tax and/or non-filing of the tax return, and the action taken to remedy the problem. It is also a good idea to include copies of any back-up documentation you may have to support your request.
If you're still not quite clear on how to request the abatement of your IRS tax penalties, you could hire Fresh Start Tax Relief to help you determine what penalties you have and how to request abatement from the IRS.
What If the IRS Rejects My Request for Penalty Abatement?If the IRS rejects or denies your first request for abatement of penalties, you may Appeal the IRS decision. If you've received a letter advising you of the IRS decision to reject your penalty abatement request, it should provide instructions on how to Appeal the denial. It is usually as simple as promptly responding to the letter in writing to request an Appeal of the abatement denial. If you aren't sure where to start, contact the IRS at the toll-free number on the notice. But better yet, contact Fresh Start Tax Relief at the phone number at the bottom of this page.