A penalty abatement is a respite that allows you to avoid paying fines for not filing or paying your taxes. Only one reprieve will be given, and it must be for the tax year for which you are requesting. And it can’t be extended to fines that last for several years.
Who needs penalty abatement?
Failing to file or pay your tax return on time will lead to the IRS issuing significant penalties. The penalties can go up to 25% for failure to file and up to 25% for failure to pay, plus interest. So if your tax debt is several years old, sometimes the penalties and interest can be an additional 50% of the actual tax liability.
There are ways to get these penalties removed. That means if you haven’t had a penalty and/or filed all of your necessary returns for the previous three years, you most likely qualify for first-time penalty abatement, and that’s for the failure to file and failure to pay.
There’s also ways to get accuracy penalties removed. If you file a return in an inaccurate account of liability, the IRS may issue a 20% penalty. In that case, there’s a reasonable cause. If it was a tax preparer’s fault, if there was a death, there’s several other reasons and other ways to get the accuracy penalty waived.
Just because the IRS issued a penalty doesn’t mean that it’s correct and doesn’t mean that it can’t be removed. So you should definitely speak with a professional to analyse your account to see if you qualify.
Taxpayers who have failed to file or pay a penalty can ask the IRS to “abate” the penalties. Abatement is the process of eliminating penalties from a taxpayer’s account once they have been assessed. Because the IRS assesses these penalties electronically (via its computer systems) when a return is filed or a transaction is made on a balance due account, failure to file (FTF) and failure to pay (FTP) penalties typically need abatement.
The IRS has two major grounds for waiving the FTF and FTP penalties:
Reasonable Cause Relief (RC): When a taxpayer can demonstrate that they used customary caution and prudence but were unable to comply (file or pay on time) owing to unanticipated events beyond their control (“reasonable cause”).
IRS’s First-time Penalty Abatement Relief (FTA): For a taxpayer in good standing, it can be used to waive both the FTF and FTP fines. This implies the taxpayer has a clean compliance history and has filed all returns, paid all taxes, or reached an arrangement with the IRS on the sums owing (no penalties in the past three years prior to the penalty year).
Do I qualify for a penalty abatement?
If the taxpayer is able to provide a reasonable explanation, the IRS may be able to reduce or eliminate the penalty. This kindness, however, may only be granted to you if you have filed and paid your taxes consistently for the past three years.
The following are some of the logical causes:
A death inside a family
Natural disasters
Illness
Divorce
Prolonged unemployment
A mistake by the IRS
Should I get a penalty abatement?
If you are looking for a tax professional who has penalty abatement experience, call us! We’ll look into your case and help you show that you’ve been paying your taxes on time for at least three years in order to qualify. Our years of expertise have given us a high rate of success when it comes to removing fines.
