What Is a Penalty Abatement and How to Get One?
Penalty abatement offers an opportunity for taxpayers to reduce or completely absolve particular IRS penalties related to their tax return. Before delving into the nuances of penalty relief, one must familiarize oneself with general IRS penalties.
Introduction to Penalty Abatements
Penalty abatement can be equated to receiving a second chance, especially in the realm of tax resolution. For instance, consider being late for a movie; if the theater lets you watch the next show without an additional charge, that mirrors the idea. What prompts the IRS to impose these penalties?
Common Penalties
Failure to File
This penalty occurs when taxpayers don’t file their tax return within the stipulated deadline.
Failure to Pay
This IRS penalty manifests when a tax return is filed, but the due taxes remain unpaid by the set deadline.
Failure to Deposit
Primarily aimed at businesses, this penalty arises from not depositing specific taxes, like employment taxes, punctually.
How to Qualify for an IRS Penalty Abatement
There are specific criteria to meet for a penalty abatement.
Qualifying for First-time Penalty Abatement
You may qualify for First Time Abate for a penalty if you have a history of good tax compliance
Penalties Eligible for First Time Abate
Penalties eligible for First Time Abate include:
Failure to File – when the penalty is applied to:
Failure to Pay – when the tax:
- Shown on the return is not paid by the due date – IRC 6651(a)(2)
- Required to be shown on a return but was not, and that tax was not paid by the date stated in the notice or demand for payment under IRC 6651(a)(3)
Failure to Deposit – when the tax:
- Was not deposited in the correct amount, within the prescribed time period, and/or in the required manner – IRC 6656
You may receive relief from one or more of these penalties on a tax return during a single tax period. We consider First Time Abate relief regardless of the penalty amount.
*From IRS.GOV
8 Tax Penalty Abatement Factors
Certain circumstances might influence the IRS's decision:
- Death in the family.
- Natural disasters.
- Inability to obtain records.
- Divorce or separation.
- Serious illness.
- Erroneous advice from a tax preparer.
- Honest mistakes.
- Experiencing hardship.
How to Request an Abatement of Penalties From the IRS
Follow these steps:
- Complete the IRS Form 843.
- Draft a letter detailing the reasons for requesting an abatement.
- Provide any necessary supporting documents.
- Await a response, which may take some time.
Contact Priority Tax Relief to Qualify for Penalty Abatement
When confronted with tax issues, especially unpaid taxes, contemplating Priority Tax Relief is prudent. Our adept consortium of tax professionals, including CPAs, Enrolled Agents, and Tax Attorneys, are at your disposal to navigate the complexities of IRS penalties and penalty abatements. Don’t tread these tumultuous waters solo – let our expertise steer you towards relief.
Conclusion
Life is unpredictable, often affecting our finances. Thankfully, with mechanisms like penalty abatements and dedicated tax resolution agencies, maneuvering through these financial hurdles becomes simpler.
FAQs
How does "Failure to File" differ from "Failure to Pay"?
"Failure to File" pertains to not meeting the deadline to file your tax return. In contrast, "Failure to Pay" is about not settling due taxes timely.
Is it possible to secure multiple penalty abatements?
While the First-time Abatement is singular, other abatements might apply based on individual scenarios.
Is hiring a lawyer necessary for the abatement process?
It’s not a requirement, but some might find professional consultation helpful.
What's the usual processing time for an abatement request by the IRS?
The period can fluctuate from several weeks to months.
What steps can be taken if the IRS denies an abatement request?
Taxpayers have the leverage to contest the decision or mull over alternative tax arrangements with the IRS.