How to Request a Penalty Abatement from the IRS

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How to Request a Penalty Abatement from the IRS

 

Happy Friday after Tax Day, everyone! I hope you got through as best you can.

You may have filed your return and realized you had to pay some penalties for not paying on time or filing late. Dealing with penalties from the IRS can be a stressful experience for anyone. Facing financial penalties can add an extra layer of burden to an already complex tax situation, whether due to late filing, late payment, or another reason. However, there is hope. The IRS offers a process called penalty abatement, which allows taxpayers to request relief from certain penalties under specific circumstances. In this guide, I’ll walk you through the steps to request a penalty abatement from the IRS.

 

Step 1: Understand the Penalty Abatement Process

Before diving into the request process, it’s essential to understand what penalty abatement is and how it works. Penalty abatement is the IRS’s way of providing relief to taxpayers with reasonable cause for failing to comply with tax obligations, such as filing returns or paying taxes on time. When evaluating abatement requests, the IRS considers various factors, including illness, natural disasters, and other unforeseen circumstances.

 

Step 2: Gather Necessary Information and Documentation

To request abatement, you should fill out Form 843. You must also gather relevant information and documentation to support your penalty abatement request (See section 7).

This support may include:

  •  Explanation of the circumstances that led to the non-compliance (e.g., medical emergencies, financial hardship, natural disasters)
  • Any supporting documents that validate your explanation (e.g., medical records, letters from employers, financial statements).
  • Evidence of compliance history, such as past timely filing and payment records.
  • A statement expressing your commitment to complying with future tax obligations

 

Step 3: Write a Formal Request Letter

Craft a formal request letter addressed to the IRS office handling your case. In the letter, explain clearly and concisely why you’re requesting penalty abatement. Be honest and transparent about the circumstances that led to the non-compliance, and express your commitment to meeting future tax obligations. Attach any supporting documents to substantiate your claims. Feel free to contact me if you’d like a template for your letter.

Keep in mind if your penalties are less than $500 or you’re asking for a first-time abatement, you can save time by calling the IRS and requesting an abatement rather than sending a formal letter.

 

Step 4: Submit Your Request to the IRS

Once you’ve written your request letter and gathered all necessary documentation, it’s time to submit your request to the IRS. You can typically mail your request to the IRS office handling your case using the address provided on your penalty notice or other correspondence from the IRS. I recommend sending the information via Certified Mail so you have proof of receipt. Be sure to keep copies of all documents for your records.

 

Step 5: Follow Up and Await Response

After submitting your penalty abatement request, following up with the IRS to ensure they received your request and have all the necessary information is essential. You can contact the IRS by phone or mail to inquire about the status of your request. Be patient and allow time for the IRS to review your request and make a decision. This process usually takes three or four months. Once the IRS makes a decision, they will notify you by mail.

 

Step 6: Appeal if the IRS Denies Your Request

The IRS uses automated tools for initial abatement requests, which often goes against the taxpayer. So, if you received a letter 854C denying your request, appeal the denial within 60 days of determination. This appeal will go to an agent, who will evaluate your circumstances. Appealing the denial can take an additional three to nine months.

 

Requesting a penalty abatement from the IRS can be daunting and time-consuming, but obtaining relief from specific tax penalties is possible with the right approach and documentation. Following the steps outlined in this guide and compellingly explaining your circumstances can increase your chances of a successful abatement request. Remember, if you’re unsure about the process or need assistance, don’t hesitate to seek guidance from a tax professional or attorney.

 

 

 

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