A key tactic of the IRS is to assess penalties against delinquent taxpayers and unfiled income taxes is penalty abatement. Some estimates put IRS penalties since the turn of the century at more than $12 billion per year. With large amounts money on the line, the IRS will do anything it can to collect a back tax debt. When you present a case for removing the penalties and interest assessed against a back tax debt, the IRS will often abate the penalties. It is essential to have the penalty abatement process handled by experienced CPAs and Tax Attorneys like the Tax Experts at the Tax Resolution Institute.
Penalty Abatement is the process of eliminating or reducing penalties assessed up by the IRS. For most penalties, a standard called “reasonable cause” is what is required to accomplish penalty abatement. Reasonable cause means that despite “the exercise of ordinary business care and prudence,” a taxpayer was caught in a specific situation in which they could not file their tax return, or pay their taxes on time.
The process of Penalty Abatement gives you the opportunity to plead your about why you failed to pay your back taxes to the IRS. Unlike most other claims for debt relief, the penalty abatement process puts a human face on your case. By transforming you from a statistic to a person, penalty abatement can work in your best interest. Success in the process can relieve you of some or all of the penalty fees you have incurred if you can explain adequately your failure to pay the back tax debt.
The IRS has the ability to be flexible when it comes to penalty abatement. The IRS’s operation handbook, the Internal Revenue Manual, sets out general rules for negotiating penalty abatement. The ability to grant relief from penalties falls into four categories: reasonable cause, statutory exceptions, administrative waivers and correction of service error. There is flexibility in the area of reasonable cause when it comes to negotiating a settlement.
There are three ways to present a case for abatement. A written petition is the most common approach; you state your case in just a few written paragraphs. If for some reason this is not practical, you may request a verbal interview. Lastly, you can present a shortened statement of your case with Form 843. What is essential is to have your case written and presented by a tax professional like the tax experts at TRI.
It is difficult to predict the result of the appeal – sometimes the IRS surprises – but convincing arguments within the offered guidelines can give you a good chance for abatement. Most importantly, you should have a tax professional handle the process of penalty abatement. With years of experience with the IRS and expertise in penalty abatement, the Tax Resolution Institute can provide you with the tax relief help with the IRS you need.
IRS guidelines generously suggest that abatement should be “generally granted when the taxpayer exercises ordinary business care and prudence” in trying to pay their taxes. In other words, did you make efforts to fix the problem? When taxes were due, did the taxpayer promptly notify the IRS of a problem and pay what was practical? Your best proof is documentation. The Tax Resolution Institute tries to establish what went wrong on paper through correspondences and notices.
Although individual circumstances remain quite important, there are some instances in which abatement may be granted:
1. Were you or your business the victim of crime (especially embezzlement)
2. Did a natural disaster damage your ability to make money to pay taxes?
3. Were you financial records destroyed or stolen through no neglect on your own part?
4. Did you experience family problems that you can prove, such as a divorce, a serious illness or the death of a close family member?
5. Did you receive bad advice or did a so-called tax expert scam you?
6. Did the IRS made a mistake in the processing of your claim or did the IRS give you bad advice on how to file your taxes?
No matter how well you state your case, the IRS appeals officer assigned to your abatement request will have some hard questions. With the Tax Resolution Institute by your side, the answers to these questions will be prepared and ready to go. Even if we are successful with the penalty abatement process, we will only be able to eliminate part or all of your penalties and interest. The initial base tax amount that caused the penalties and interest will still have to be paid.
Like a collection agency, the IRS always focuses on making sure the initial tax debt is paid in full. Still, eliminating the penalties and interest can lift a huge financial burden off of you, usually up to 25% of the total tax debt amount owed. By allowing the Tax Resolution Institute to handle the Penalty Abatement process for you, you give yourself the best chance to succeed and have the penalties placed on your back tax debt wiped away.