Penalty Abatement

The IRS is responsible for assessing penalties on taxpayers when federal taxes aren’t properly paid on time. Penalties are commonly assessed as monetary fines, but also can be in the form of a lien or levy on your property, as well as jail time. Monetary fines are based on the amount of taxes due past the deadline.

Examples of penalties with monetary fines include the Failure-to-File penalty, which is for filing after the deadline if you owe money when your return is filed, and the Failure-to-Pay penalty, which is for having a back-tax balance after the deadline.

What is a Penalty Abatement?

The IRS may consider removing one of these penalties in extraordinary circumstances, such as the death of a close family member or an extended hospital stay- this is called a Penalty Abatement. The IRS may also consider certain tax cases for a First Time Penalty Abatement waiver, which can be applied for a single tax period. Taxpayers must meet the following criteria to be considered for a First Time Penalty Abatement waiver:

  • All currently required returns are filed or an extension to file has been approved by the IRS,
  • The tax due has been paid in full or a suitable payment arrangement has been established with the IRS,
  • No returns needed to be filed previously or no penalties were imposed on returns filed in the previous three years.

If you’re not sure if your case meets these criteria, you’re not alone. Many taxpayers benefit from hiring professional and reputable tax relief professionals who are adept at maximizing the programs and waivers available from the IRS, to help taxpayers overcome their back-tax debt.

IRS Considerations for Penalty Relief

If a penalty is imposed on your back-tax balance, the IRS may consider removing the penalty in extraordinary circumstances.
Presenting a request to the IRS to waive a penalty requires careful thought and preparation.
First, check the information received by the IRS with the information you have in your records to confirm that the penalty wasn’t imposed in error.
Errors do occur when penalties are being assessed; discovering an administrative mistake or another type of error is often one of the simplest ways to reverse a monetary penalty.
If you determine that the penalty was accurately assessed, evaluate the cause of the penalty.
Taxpayers who failed to pay their taxes on time because they forgot, didn’t know how or couldn’t afford it will likely be denied an abatement.
However, being unable to afford the bill may indirectly qualify for a penalty abatement if there’s a severe financial hardship.

If there’s a reasonable cause that can be verified through documentation, the abatement has a better chance of being granted. The IRS notes common events considered to be reasonable causes to miss a timely tax return filing and/or payment on their website:

• Fire, casualty, natural disaster or other disturbances
• Inability to obtain records
• Death, serious illness, incapacitation or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family
• Other reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so.

Documenting Reasonable Cause for the IRS

It’s critical to establish the event when presenting your case to the IRS for a penalty abatement. Clearly communicate what happened and the date on which it happened. Explain how the event kept you from filing your return or paying your taxes on time.
Include what efforts you exerted to file and pay on time despite the event. If the penalty abatement request is for a corporation, estate or trust, discuss who had the authority to file and pay the taxes during the event.
Gather relevant documentation to support your case, such as hospital bills or court records and include copies of them when submitting your request.

Getting The Help You Need

With no hard and fast rules to achieve a penalty abatement, the determination is at the discretion of the IRS. Presenting a clear case to the IRS with robust supportive documentation is crucial for a successful outcome.Contact a reputable tax professional to discuss your options for tax relief. A penalty abatement is one of several ways in which taxpayers can seek relief from their back-tax debt. A tax relief professional may be able to recognize other avenues of debt resolution with the IRS that would be appropriate for your case.

Why Tax Champions?

At Tax Champions, we’ve been working with clients to resolve their back-tax debt, for the least amount they qualify for, over the past 35 years. We have an exhaustive understanding of IRS procedure and can easily identify the most beneficial programs in each client’s case.

Contact us now for your free consultation about your personal circumstances. We’ll be happy to go over your options with no obligation to hire our firm and no high-pressure sales pitch. If you determine that our firm is a good fit for your needs, we’ll be happy to get started right away.

We’re on your side and we’ll negotiate with the IRS until we’re certain that you are only paying your fair share of taxes with the least amount of penalties and interest possible.

Submit your contact information in the blue box on the right side of this page or give us a call direct at 888.518.8964 during the day and evenings, seven days a week.

Sleep better tonight knowing that your tax case is in our capable hands.

Call today.



[1] IRS First-Time Penalty Abatement. (2018, August 2). Retrieved from //www.aicpa.org/interestareas/tax/resources/irsprocedureadministration/irspenaltyabatement.html

[2] Penalty Relief Due to First Time Penalty Abatement or Other Administrative Waiver. (2019, March 21). Retrieved from //www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-first-time-penalty-abatement-or-other-administrative-waiver

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Walter Wotman, CPA

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Walter Wotman, CPA is the author of "Tax Champions Guide to Tax Resolution." Amazon #1 Best Seller in the Personal Finance category. He is one of America's most experienced tax negotiators with over 35 years of experience helping thousands of clients settle difficult back tax issues.

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