IRS Penalty Abatement



IRS Penalty Abatement

The IRS can sometimes be surprisingly helpful. There are times when they will waive penalties. Keep in mind that in order to get these privileges, you will be subject to the IRS’s rules and opinion, so it is always advisable to talk to a tax professional before addressing the IRS processes by yourself. Remember that any process with the IRS takes time, so take action sooner rather than later, if you decide that action must be taken don’t procrastinate gathering all the information and forms you will need.

Only one abatement is possible for every three-year period under the FTA (Federal Transit Administration). So if you received penalty abatement in the past year, you will have to wait another two years to be eligible for abatement on a penalty.

There is the First-Time Penalty Abatement which is applied to those who meet the following situations:

  • You have no penalties for the 3 tax years prior to the tax year that the penalty applies to
  • The situation isn’t caused by willful neglect.
  • You didn’t have to previously file a return
  • You have filed all required returns or filed an extension
  • You have paid or set up a payment plan for any due tax

This type of waiver is a one-time consideration available only for a first-time penalty charge and is strongly based on if you have a history of compliance. If the compliance does not meet the IRS’s requirements, the waiver is then based on what was stated in the IRS Abatement Letter.

What are Other Reasons for Abatement?

There are specific statutory exceptions that can be applied to specific circumstances, for example, when the tax is less than $1,000, there is no tax liability for the preceding year, or you’re newly retired or disabled. Other situations to consider are documented errors made by the IRS or any incorrect written or oral advice from the IRS that was relied on.

In any case, no matter your situation. In order to get your penalties abated, you will be required to write or communicate a ‘reasonable cause’ letter to the IRS in which you will write the reasons that make you eligible to receive abatement. Fortunately, the IRS has provided a list to help you determine whether you qualify for penalty abatement, for help with composing this letter consult a tax professional. A tax professional is fully aware of all the forms you will need to get the penalties abated. At Private Tax Solutions, we aim to bring you smart solutions and peace of mind, call us to schedule an appointment for free consultation at 844-774-8829.

IRS Processes Takes Time

A friendly reminder though, the approval process for the penalty abatement can be quite lengthy, so don’t be concerned if you sent out a valid ‘reasonable cause’ letter weeks ago and still don’t know whether your appeal has been approved. Also any delays in payment to the IRS will result in the failure-to-pay continuing to accrue until the tax is paid in full. We understand that facing the IRS is hard, make it easier by not doing it alone.