IRS Penalty Abatement: Understanding the Eligibility Requirements and Application Process

Being hit by IRS penalties is a thing nobody in a household would want. Frankly, a situation like this can be very nerve-racking and demanding. However, do you know that there is a way to get the penalty to potentially reduce or be eliminated? 

But before knowing how to, it is important to have an idea about what basically is a Penalty Abatement. An IRS Penalty abatement is the very process of requesting the IRS to either lessen down or eliminate penalties which are assessed on individuals for non-compliance with the tax laws and regulations.

In case you owe the government taxes and fail to pay it on time, the IRS most potentially will assess penalties on the outstanding sum. These penalties, unfortunately, pile up real quick – making the process of paying it off much more difficult than it already is. For example, if you owe them back taxes, the IRS might as well resort to IRS wage garnishment to collect what you owe. The IRS has authority to impose a variety of penalties, including but not limited to Failure to File, Failure to Pay, Accuracy Related Tax Issues – among many others. 

Luckily, after the IRS introduced the Penalty Abatement Program, eligible taxpayers sighed a breath of relief. But, do you know its eligibility and application processes? Let us walk you through every important detail of the Penalty Abatement Program. Read more to find out!

What is Penalty Abatement?

The IRS Penalty Abatement is a method which allows taxpayers who apply to get their penalties reduced or further eliminated. Facing hardships is not very uncommon for the human race, and it is undeniable that taxpayers may often face circumstances beyond their control, hindering them to pay the due amount to the government. 

If you show a reasonable cause, something that you have zero control over, the IRS may drop down to waive or reduce penalties, given that the evidence you put on table matches their criteria. 

There are quite a few types of IRS penalties that can be abated, including,

  • Failure-to-file penalty
  • Failure-to-pay penalty
  • Accuracy-related penalty
  • Fraud penalty

Eligibility to Apply for IRS Penalty Abatement

In order to apply for penalty abatement, individuals are required to show a reasonable case for why they were not able to pay the pending dues on time, or file their tax returns. If you have foolproof evidence, demonstrating it very clearly might as well keep the taxes down. 

Some of the many reasonable causes taxpayers have include:

  • Serious injury or ailment
  • Death in the family
  • Natural disaster
  • Separation or Divorce
  • Unable to get the required records
  • Mistake made by tax advisor
  • Ignorance of law

The IRS Penalty Abatement program offers relief to taxpayers who have been assessed penalties after they have failed to file tax returns, pay it or for any amount of violations. However, it is important to remember that not all taxpayers qualify for IRS penalty abatement, and it is highly imperative to understand the eligibility requirements before applying.

Some of the eligibility requirements in this case include:

  1. Reasonable Cause: In order to qualify for penalty abatement, it is important that you show that the failure to file or pay the pending sum on time were mainly due to a reasonable cause and not for any intentional neglect. Reasonable cause, for anybody, is a circumstance beyond your control that hindered you to meet your tax obligations, including natural disaster or a serious ailment.
  2. Timely Filing: You should have filed all your tax returns exactly by the due date, or must have filed for a time extension until which you will be able to pay. Failure of the same can lead to IRS penalties.
  3. Compliance History: In order to qualify, you must have a clean compliance history for at least three years. This clearly just indicates that, during a timeline of three years, you must have filed and paid your taxes right on time. 
  4. Timely Payment: Are you behind on paying your tax returns? If yes, you have trouble on your way! You must have paid at least about 90 percent of the tax liability for the current year or have clearly charted out a couple arrangements to pay the balance through an installment agreement or via relevant resources.
  5. Previously not Granted Relief: In the past, you cannot really have been granted penalty abatement for an issue same as today.

In cases as concerning as dealing with the IRS, despite the platform, make sure you take close advice from a professional tax consultant who knows the ins and outs of the system.

IRS Penalty Abatement Appeal Eligibility

Individuals or companies can request an appeal for several reasons, some including:

  • The taxpayer or business mailed a letter to the IRS in order to put forward a request to remove a penalty.
  • They have received a denial for the abatement post the submission of the request.

IRS Penalty Abatement Application Process

Let’s give you a clearer picture with a step-by-step guide of the application process. 

  • Identify Penalties You Want to Put Abatement Request for

You can request abatement for a variety of penalties, including failure to pay, failure to file or issues which are accuracy-related. Herein, it is on you which penalties you want to request the abatement for.

  • Penalty Abatement Letter

Letters are what makes the word clearer. The IRS, in this case, requires a written request for penalty abatement. A typical letter you will have to send must contain your name, address and Social Security number or the Taxpayer Identification Number. After you have detailed all the important vitals about you, explain the reasons for your penalty, and provide any and every relevant information which can further support your request for the abatement.

  • Make sure you Attach All Supporting Documents

In case you have any form of documents that can support your request for the IRS Penalty Abatement, including but not limited to medical bills or casualty loss documents, you can – and potentially should attach them to your letter.

  • Mail the Letter

It is now about time that you mail the Penalty abatement letter, alongside the supporting documents to the given address in the penalty notice you first received from the Internal Revenue Service (IRS). In case you have trouble finding the address in the notice, you can directly call the phone number that has been listed on the received notice in order to acquire the correct address.

After all the procedures are done, wait for a response. The IRS is going to review your request, alongside the supporting documents you have presented to them. Post that, they will notify you of their decision in a written format. Always remember, if the request is denied, you have the right to appeal the decision taken.

Conclusion

If you have found yourself on the wrong side of the IRS, do not lose hope just yet. There are several options open to you which can aid the waiver or reduction of IRS Penalty Abatement. It exists to help those in need. In this case, it is the taxpayers who have a legitimate reason for falling behind on their taxes, piling up the amount.

Remember, being proactive and further getting in touch with the IRS can travel a long way towards resolving your tax issues. So, why not take a deep breath and contact our team of professional tax consultants? Let’s get started on a path of penalty relief together!

Author

Mr. Joshua A. Webskowski

Joshua specializes in successfully resolving cases in all areas of tax resolution including liens, levies, & other IRS collections cases.

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