IRS & State Penalty Abatement: Remove or Reduce Tax Penalties
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Abate Penalties to Eliminate Penalties
With an abatement, you may be able to eliminate part or all of your penalties and interest, but not the initial base tax amount that caused the penalties and interest. Most of the time with an abatement, you will be able to eliminate the majority if not all of the penalties, but not the interest. Eliminating these penalties may lift a huge financial burden off of you, most of the time the penalties make up 25% of the total tax debt amount owed.
When You Should Apply For a Penalty Abatement
A penalty abatement can be right for you if you can pay the tax liability owed, but you believe you should not be held liable for the penalties incurred. If you apply for an abatement and it is accepted, it is expected that you then pay your tax liability in full. In order to qualify, you must be very convincing that you should not be responsible for the penalties. Below is a list of some reasons for not being responsible, this is not a complete list, but gives you a good idea:
- Major family problems that you can prove, such as a divorce
- Theft or destruction of your records
- A major illness
- Incarceration or a major disruption to your life
- A disaster that was out of your control (Hurricane, wind storm, flooding, riot, etc.)
- Lengthy time of unemployment
- Death of a close family member
- Civil Disturbances
- Demonstrating You Were Physically Unavailable
In short, you will most likely qualify for an abatement if there were factors that were out of your control that influenced you not to pay your tax debts. Even if you do meet the criteria above, this may not be the right choice for you if you can’t pay generally 70%-90% of the initial tax amount assessed. Most of the time if you have unfiled tax returns, or if the IRS filed a SFR on your behalf, you are not going to get your penalties abated.
Filing For IRS Penalty Abatement
Get Abatement Help
Filing for penalty abatement can be fairly simple for those that know the steps involved. There are three ways to file for an abatement.
- The first way is by sending a written petition to the IRS with a few paragraphs stating your case and request a refund.
- Second, if for some reason you writing is not practical, you can request an oral interview and you can then state why you qualify for an abatement.
- Third, you can use the claim for refund and request for abatement form provided by the IRS (IRS Form 843) and follow the instructions on the form for filling out.
Provide as much information as you can, it is a must that you have a very strong case stating why you should qualify, don’t worry about providing too much documentation.
Sample Penalty Abatement Letter to IRS to Waive Tax Penalties
If the IRS has assessed penalties against you for failing to pay your federal taxes in full, paying them late, or failing to report your income, you do have the option of requesting that the IRS abate or forgive these penalties. While you are still responsible for any delinquent taxes that you owe, the IRS does not require you to pay any penalties on your delinquent taxes if your request for abatement is successful. Since penalties on delinquent taxes can be quite high, it is definitely an advantage to you if the IRS granted your request for a penalty abatement.
You can only receive a penalty abatement from the IRS if you can show good or reasonable cause for being unable to pay your delinquent taxes in full. The IRS will consider abatement requests for the following types of reasons:
- Civil disturbance such as a hurricane or flood
- Serious illness of you or a family member
- Death of a family member
- Inability to pay even though you were using ordinary care in your business operations
- Reasons beyond your control that made you unable to determine your tax
- Other reasons despite the fact that your were using ordinary business care, or
- Reasonable reliance on incorrect advice given to you by the IRS over the phone.
If your situation fits any of these reasons, then you may be entitled to a penalty abatement simply by asking the IRS for the abatement. In order to request a penalty abatement, you can call the IRS (especially if it is the first-time you are requesting it). You can also write a penalty abatement request letter to the IRS, and enclose a copy of your IRS notice showing your penalty, as well as any written documentation that you have in support of the reason for your penalty abatement request. You also should complete IRS Form 843 – Claim for Refund and Request for Abatement, and include it along with your letter. Furthermore, while it is not required, you should send payment for your delinquent taxes along with your penalty abatement request letter to the IRS, if you can do so.
The sample letter is only for informational purposes only. Please consult with a tax firm or a licensed tax professional before sending the letter.
Sample Penalty Abatement Request Letter
Penalty Abatement Coordinator
Address (as stated on your IRS notice of penalty)
Your Social Security Number
RE: Request for Penalty Abatement
To Whom It May Concern:
I am requesting an abatement of the penalties on the taxes that I owe. These penalties are in the total amount of $___________, as shown by the IRS tax notice of penalties dated ____________, which I have enclosed.
I: (choose one of the following options)
_____ paid my taxes late
_____ filed my taxes late
_____ did not report income
for the following reason(s):
(In this section of your letter, describe the reason(s) that you paid your taxes late, filed your taxes late, or failed to report income. Common examples of valid reasons include the death of a family member, serious illness of you or a family member, a civil disturbance such as a tornado, flood, or fire, or any other reason that prevented you from complying with the IRS.)
Please find enclosed a copy of documentation that supports my reason(s) for requesting an abatement of penalties.
(In this section of your letter, describe the type of documentation supporting the reason(s) that you paid your taxes late, filed your taxes late, or failed to report income. Examples of supporting documentation include death certificates, statements from a doctor regarding illness or a medical condition, or pictures showing your home following a fire or hurricane.)
Please approve my request for abatement of penalties for good cause. I also have enclosed a payment in the amount of $_____________ toward the taxes that I owe. (Omit the previous sentence if you cannot enclose a payment toward your taxes. However, you should try to enclose a payment if possible.)
Each state has their own rules for allowing individuals and businesses to abate penalties. In many states, if a person or business can get penalties abated with the IRS, then they will most likely qualify to abate penalties charged by the state taxation authority.
We have detailed out the various tax relief options available in each state and provided contact information and forms if applicable. Use our state tax relief guide to select your state to obtain the specific instructions on abating penalties in your specific state.
If you need assistance with requesting penalty abatement, fill out the form to the right or give us a call.
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