How to Get a Tax Penalty Waived – Penalty Abatement
If the Internal Revenue Service (IRS) contacts you and alleges that you owe back taxes or underpaid taxes, there is a good chance you could be subjected to a penalty (if it turns out you do in fact owe the amount alleged by the IRS). Penalties levied by the IRS are quite common. For example, the IRS assessed close to $38 million in tax penalties, and that was just in 2012. In many instances, the IRS will levy a tax penalty automatically with no regard for the taxpayer’s situation.
Many taxpayers often wonder, “is there a way I can get this penalty waived?”
The answer is – possibly.
Grounds for Seeking Penalty Abatement
It is possible to pursue penalty relief if you fall into one of four categories:
- Reasonable cause
- Statutory exceptions
- Administrative waivers
- IRS made an error in assessing the penalty
First-Time Abatement Penalty Waiver
It may be possible to apply for a first-time abatement penalty waiver if you were alleged to have failed-to-file, failed-to-pay, or failed-to-deposit tax payments and were subsequently assessed a penalty by the IRS.
To qualify for this first-time abatement, a taxpayer cannot have any other prior penalties of a “significant amount” on the same type of tax return within the past three years. In addition, a taxpayer needs to be in compliance with all tax payment and filing requirements.
In addition to the first-time abatement penalty waiver, there are other ways for a taxpayer to request relief from a tax penalty.
Methods for Requesting Relief from an IRS Tax Penalty
Taxpayers have multiple options in order to request relief in certain situations where they were assessed a tax penalty. These situation include, as stated earlier, when you are assessed a penalty for failing to file your taxes, failing to pay your taxes, and/or failing to deposit tax payments. The methods by which you can seek relief include:
- Filing a penalty non-assertion request with a paper return to request that the IRS not automatically assess the penalty.
- Formally requesting tax penalty abatement via a written letter or by contacting the IRS directly.
- Pay the penalty and request a refund using Form 843 (i.e. Claim for Refund and Request for Abatement) and file this form within three years of the return due date or filing date. You can also file Form 843 within two years of the date you paid the tax penalty.
How the IRS Decides Whether to Approve or Deny a Penalty Waiver Application
When making the decision on whether to approve or deny a waiver application, IRS personnel utilize a decision-support tool known as the Reasonable Cause Assistant (RCA). This is a software program that enables IRS personnel to input certain factors into RCA to analyze your viability for a penalty waiver.
Need Help Securing Tax Debt Relief? Contact Anderson Bradshaw Tax Lawyers Today
To get a better understanding of your options, take action and contact the experienced tax attorneys and professionals at Anderson Bradshaw Tax Consulting. We are here to help and can provide professional assessment and guidance to determine whether you qualify for administrative relief that could potentially reduce or remove your tax penalty burden. For further information or to schedule an appointment please contact Anderson Bradshaw at 877.550.3911 or visit www.AndersonBradshawTax.com to learn more.