Abatement of Penalties

Question:  I do not have the funds to pay what I owe for my 2018 income tax return.  I also was late in filing the return. Not only is the IRS demanding the tax I owe, but they have slapped on these huge amounts for penalties and interest.  I had extenuating circumstances that caused all of this. This isn’t fair…what can I do?

Answer:  We can request the removal (abatement) of penalties 2 ways:  1) “First Time” Penalty Abatement and 2) a Reasonable Cause Argument. The IRS writes off billions of dollars in penalties each and every year, but you must know how to do it correctly. A First Time Penalty Abatement  (FTP) can be requested if you have a “clean” compliance record, meaning you have not incurred a Failure to File or Failure to Pay penalty for the 3 years preceding the year you are requesting relief for.  FTP is generally granted in most cases, regardless of what the underlying reason is, if you are eligible.

If you do not qualify under FTP, there are 9 main “Reasonable Cause” arguments to get your penalties removed.  They are: 1) Death, Serious Illness, 2) Fire, Casualty or Natural Disaster  3) Unable to Obtain Records (common issue with couples going through a divorce)  4)  Mistake was made by the taxpayer or tax preparer, 5)  Erroneous Advice or Reliance on a tax preparer  6)  Written/Oral Advice from the IRS  7)  Ignorance of Tax Laws  8)  Reasonable Cause/Ordinary Business Care and Prudence  9)  Undue Economic Hardship.

Your Tax Resolution Specialist will guide through what documentation is needed to submit a formal legal request in writing.  For instance, let’s say you were going through a divorce and you ex-spouse withheld records from you needed to file a complete and accurate income tax return and you filed your return late because of this.  You could request abatement of these penalties using one of the above reasonable cause arguments, specifically #3 above.

We at Jim Matthews CPA are experts in IRS tax problem resolution and help taxpayers with their IRS Problems every day.  There is a solution to EVERY problem. Generally, you’ll never have to meet or speak with the IRS once you bring us into the picture. Call us today! 972-613-3034