How To Qualify For IRS Penalty Abatement Or Penalty Waiver

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IRS Penalty Abatement

IRS Penalty Abatement

Penalty abatement is a relief option provided by the IRS to remove or reduce penalties associated with unpaid taxes or failure to file a tax return. Penalties can accumulate quickly and significantly increase the amount of money you owe to the IRS. There are several types of penalties that the IRS may abate, including penalties for failing to file a tax return, failing to pay taxes on time, and failing to deposit taxes as required. To qualify for penalty abatement, you must have a reasonable cause for your failure to pay taxes or file a tax return. Reasonable cause may include events beyond your control such as a natural disaster, serious illness, or death in your immediate family.

There are three main types of penalty abatement:

First-Time Penalty Abatement

This Is For Taxpayers Who Have Not Incurred Any Penalties For The Three Tax Years Preceding The Tax Year For Which They Are Requesting Abatement. You Must Also Have Filed All Required Tax Returns Or Filed An Extension, And Paid Or Arranged To Pay Any Tax Due.


Reasonable Cause

This is for taxpayers who can show that they tried to meet their tax obligations but were unable to do so due to circumstances beyond their control. This may include death, serious illness, fire, natural disaster, or other unusual events.


Statutory Exception

This applies if you received incorrect written advice from the IRS. To qualify, you must provide the IRS with a copy of the incorrect written advice you received, as well as the written request for advice.


To request penalty abatement, you can call the IRS and request it over the phone, write a letter to the IRS requesting abatement and explaining your reasons, or use IRS Form 843, Claim for Refund and Request for Abatement.

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IRS Penalty Abatement

Fortunately, the IRS has created the first-time penalty abatement. This is a little heard of administrative waiver that many American taxpayers do not know much about.

If you own a business or you are an individual taxpayer, you may receive a penalty on top of what you owe in tax to the IRS. The first time penalty waiver allows compliant taxpayers to request abatement or remove certain penalties.

TheCPATaxProblemSolver, is experienced in penalty abatement.

IRS penalties can be quite substantial, leading to a significant increase in your tax debt when you file or pay taxes late. However, there is some relief available as the Internal Revenue Service (IRS) is open to removing certain penalties.

This relief process is known as penalty abatement. In most cases, the IRS doesn’t automatically remove penalties; instead, you must request their removal. The IRS considers various situations for penalty removal, but it’s generally easier to have penalties waived if you are a first-time offender, have reasonable cause for incurring the penalties, or received incorrect advice from an IRS agent.

To obtain penalty abatement, you need to convince the IRS to eliminate the penalties. It is helpful to have a good understanding of tax laws when applying for penalty relief. Seeking assistance from a tax professional can guide you through the process. I have extensive experience helping clients apply for reasonable cause relief and other forms of penalty abatement. Contact me for assistance with IRS penalties.

What Is Penalty Abatement?

Penalty abatement refers to the IRS agreeing to remove penalties from your account. This relief can apply to almost any penalty assessed by the IRS, and it may be referred to as a penalty waiver or penalty relief. The process for applying for abatement varies based on the type of penalty and the reason behind its occurrence.

Which Penalties Qualify For Abatement?

You can request abatement for a wide range of IRS penalties, including:

1. Failure to file tax penalty: This penalty applies when you fail to file or file your tax return late.
2. Failure to pay penalty: This penalty is incurred when you file your tax return but fail to pay the owed amount.
3. Failure to deposit penalty: Employers face this penalty if they don't timely deposit their payroll taxes.

Regardless of the penalty amount, you can request relief for any of these penalties. However, relief cannot be requested for penalties related to fraud or tax evasion. Additionally, the trust fund recovery penalty is ineligible for abatement, but you may be able to appeal it if you can demonstrate it shouldn't have been imposed.

These penalties are not fixed amounts but rather a percentage of the tax liability resulting from unreported, unpaid, or undeposited taxes. Therefore, the penalty amount and the relief needed can vary significantly based on the underlying tax obligation.

Interest On Tax Penalties

When the IRS imposes a penalty, it becomes part of your tax debt, and interest accrues on the balance. Interest begins accumulating on the due date of the return, payment, or deposit. The IRS also applies interest on penalties, starting from the date the penalty is added to your account, with compounding interest. This can lead to substantial interest charges. The interest rate varies and is adjusted quarterly in accordance with the Federal interest rate.

The good news is that if you qualify for penalty abatement, the associated interest will also be removed by the IRS. Except for cases where the tax assessment changes or interest was assessed in error, other interest cannot be waived. However, successful penalty abatement can reduce the interest portion of your balance as well.