Why doesn’t the IRS abate the majority of penalties and interests? It is probably because people don’t know how to file penalties and interest waivers. Others think the process is tedious and not worth the time.
If you are looking for an answer as to whether it is possible to get the IRS to waive your penalties and interest, this post is meant for you, and here are the things you need to know to qualify.
The answer is YES! But exactly how is this done?
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How to get your penalties and Interest Abated
First, know that it is possible to negotiate for penalties and interest to be abated by the IRS, even though this is within the discretion of the agent you are working with.
Second, this is not a quick fix, and the process can take a year or two to fully negotiate with the IRS to abate your penalties and interest.
To begin with, you request IRS relief in writing and then fill out Form 843, Claim for Refund and Request for Abatement. But remember you are negotiating, and there are no hard lines as to when the IRS should waive your penalties, and they can decide not to if the agent deems so.
Be sure to respond to any IRS request for supporting documents and be prepared to argue in favor of your position. In instances where the IRS denies your request, appeal the decision before the deadline, arguing your position with the IRS Appeals Office. In some instances, you might require additional legal arguments, like a case arguing in your favor.
You have a better chance of abating your penalties and interest if you negotiated a penalty reduction when it was a one-time event beyond your control. You must prove that you could not perform some critical tasks like work and personal obligations like clearing bills.
Some of the unforeseen events that the IRS can consider and agree to waive your penalties and interest include:
- Severe illness or death of an immediate family member
- Destruction of records
- Civil disturbances
- Lack of money
- Another reason demonstrates you exercised ordinary business care even though you could not timely file your returns.
Types of Penalty Relief
The IRS can give one of the following types of penalty relief depending on the nature of the penalty.
- The First Time Penalty Abate and Administrative waiver: Penalties under this category include failure to file, failure to pay, and failure to deposit
- Reason cause is when the IRS considers the taxpayer’s facts and circumstances that you are noncompliant during the specified timeframe. For instance, sickness, death of loved ones and even disasters like fire. You need to provide a document to support your claim.
- Statutory exception: IRS can award relief if they provided erroneous information, living in a federal disaster area or a combat zone.
When does an IRS remove penalties and interest?
IRS can remove penalties based on four reasons:
§ First, statutory exceptions: This was when unforeseeable events like war or disaster strike and the taxpayer needed relief
- The second is IRS error: This seems obvious, but the regulation is almost inapplicable since the IRS doesn’t routinely put tax advice in writing. This means the IRS can grant relief when it accepts giving erroneous oral advice, which is a rarity.
- Third, reasonable cause: This requires that you provide proof that you couldn’t file your tax returns on time based on your circumstance and the facts you present. The IRS will need to show that your failure to comply was not due to willingly neglect.
- Four, administrative waiver: This is when the IRS is looking to facilitate effective tax administration. A good example is the first-time penalty abatement (FTA). You can use the FTA to abate your failure to file, pay, and deposit deposits when you have complied for the past three years.
Get Help from an IRS Expert
Find a firm of highly qualified advocates and bankers with years of experience can solve any IRS issue, no matter how complex. Check out companies such as Ideal Tax and Larson Tax Relief. They also specialize in helping individuals and businesses with various options such as a fresh start program.
What do you need to get your penalties and interest abated?
To get your penalties and interest abated, provide these five items to our specialists:
- IRS notice copies
- The copy of the tax return in question
- Chronology of events that occurred to show noncompliance was not due to willful neglect.
- Documents supporting your reason for the waiver
- History of past penalties