Tax Penalty Abatement

For taxpayers, tax penalties and interests constitute a higher burden than even their original tax liabilities. Unfortunately, not many people understand their options when it comes to seeking penalty abatement or relief.

Tax penalty abatement enables you to eliminate a large chunk of your penalties, so if you are currently faced with an IRS tax penalty, all hope is not lost.

How Do You Qualify for Penalty Abatement?

To qualify for tax penalty relief, you need to establish reasonable cause. This means you must be able to show valid reasons for your inability to meet your tax obligations.

“Valid reasons” in this case refer to circumstances beyond your control, usually unpredictable and unfortunate events. Circumstances that can make you qualify for penalty abatement include

  • Natural disaster (flooding, hurricane, tornado, etc), fire, or other disturbances
  • A major illness or serious injury that incapacitates the taxpayer or a family member
  • Death of a family member
  • Divorce
  • Unavoidable absence
  • Financial hardship (due to loss of job, extended unemployment, or some other personal financial downturn)
  • Destruction or theft of taxpayer’s records
  • Negligence on the part of an accountant or employee responsible for paying, filing, or depositing tax bills
  • Faulty advice from a third party or the IRS leading to the tax penalty
  • An honest mistake by the taxpayer

If any of the above circumstances apply to you, applying for tax penalty abatement might be an excellent option.

However, you are required to provide supporting documentation for the IRS to grant a penalty relief.

Keep in mind that even if you qualify for tax penalty abatement, you still have to pay your tax liabilities. Penalty relief only eliminates part or all the assessed tax penalties but it doesn’t reduce your original tax bills

The IRS First-Time Abatement (FTA)

The government is not required to provide public awareness in terms of the First-Time Abatement. For this reason, many taxpayers are unaware of the option.

In most cases, taxpayers who consistently make on-time tax payments stand a higher chance of qualifying for the FTA.

First-Time Abatement Considerations

Not all taxpayers are eligible for the FTA. Here are some considerations before you apply for the IRS First-Time Abatement:

  • Compliance history: You must maintain a clean compliance history for at least three years to qualify for the FTA. Taxpayers with prior penalties are not eligible to apply.
  • Filing compliance: You need to file all currently required returns or file an extension to be eligible for the FTA.
  • Payment compliance: You don’t owe any due tax or you have an installment arrangement to pay all your tax bills.

You want to be fully confident before applying for the First-Time Abatement. It can be overwhelming to navigate the details of these tax relief systems alone. Fortunately, you can count on our expertise to help you succeed.

Other Options for Tax Penalty Abatement

In rare cases, you might be eligible for tax penalty abatement under certain scenarios. These include:

  • Administrative waiver
  • Ignorance of the law
  • Forgetfulness
  • Statutory exceptions (for example, a federally declared disaster or service in combat zones)

While these scenarios can qualify you for the IRS penalty relief, your chances are higher with the First-Time Abatement option.

Let Us Help You Get the IRS Tax Penalty Abatement

The federal government’s guidelines or requirements for a penalty relief are strict. Clients looking to qualify for abatement need to provide valid, legal documents to support their claims.

The process might seem simple and straightforward on paper but in reality, it can be complicated and often requires professional attention.

This is where we come in. Our tax experts can help you negotiate with the IRS for penalty abatement or First-Time Abatement.

But before we do this, we offer clients free consultations and professional advice without any obligation. This helps us to properly access every individual’s case to figure out the best penalty abatement options to apply for.

If your application is rejected, you can appeal within thirty days using Form 13711
(Request for Appeal of Offer in Compromise).

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