You may be able to get relief from IRS penalties by asking for what is called “abatement.” This is not always possible, but it is an option for two of the most common penalties. To request abatement, you must follow some specific rules.
Here are a few things to remember when requesting IRS penalty abatement.
1) Ask for a Written Reasonable Cause
When asking for penalty abatement, it’s crucial to provide a reasonable cause. The IRS will not just take your word for it; you must provide documentation in the form of a written reasonable cause statement.
The IRS will not grant penalty abatement unless you first send in a written request for reasonable cause. To meet the IRS standard, the request must be reasonable, must be based on fact, and must be supported by documentation.
2) Capitalize on FTA
If the IRS sends you a billing notice for an underpayment of tax, you have the right to request an installment payment arrangement. If you do this and make all required payments, the tax is considered paid in full.
You don’t need to pay the late payment penalty. The IRS then has to send you a notice to close your file, so you will no longer be subject to the additional failure to pay penalty. You can get this written notice online within 24 hours.
3) Use Adverse Determinations
If you receive an adverse determination letter from the IRS, asking for penalty abatement, you can use the letter to help you make your case.
For example, if you receive an IRS notice about unpaid tax and the IRS imposes interest charges, you can file a petition for abatement of the interest charges.
In this case, you don’t have to wait for the IRS to send you an adverse determination letter before you start the abatement process.
4) Make Sure All Information is In Your Request
You must make a reasonable cause argument to the IRS making sure all the necessary information is included. The IRS does not put you on the spot by asking for additional information at the time of review.
The IRS will impose a penalty even if your failure to pay is due to reasonable cause. If this is the case you will have to go through the penalty abatement process before your penalty will be waived.
5) Show Prior Compliance
If you have been penalized for failure to pay the estimated tax, you can show a history of paying tax on time. If you have paid taxes on IRS installment agreements in the past, that’s strong evidence that you will pay taxes in the future.
It’s a good idea to submit a history of payment to the IRS along with your abatement request. This will help the IRS decide whether or not to grant your request for a penalty reduction.
If you receive an IRS penalty notice, don’t ignore it. You could miss out on the opportunity to reduce interest charges and penalties. The best way to avoid IRS penalties is to file and pay your income taxes on time. This helps you avoid IRS penalties and saves you money.
Axiom Tax Resolution Group can help you with any resources you might need when filing IRS penalty abatement. We are a tax resolution specialist that will work with you to observe proper taxation. Get in touch with us to learn more.