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Penalty Abatement

November 19, 2015

IRS penalties can be forgiven under certain situations. If an IRS officer or employee provides erroneous written advice to a taxpayer, then the IRS will abate the penalty. Also, a taxpayer may qualify for relief under reasonable cause if the delay in filing or paying taxes was due to a situation beyond the control of the taxpayer, such as theft, natural disasters and personal tragedies.

Erroneous Written Advice

If penalty abatement is sought under inaccurate written advice from the IRS, the agency reviews various factors, including the taxpayer’s past history of compliance, the supporting documents, and if the taxpayer was provided other means of getting correct information. After the review, an IRS agent concludes whether the penalty should be forgiven.

Major Disasters

If a major disaster such as a hurricane, earthquake, tornado, etc. hit an area and the IRS declares it a federal disaster area qualifying for relief, taxpayers living in that area or impacted by the disaster can get full relief from penalties. Generally, automatic relief is offered to taxpayers affected by the disaster in the form of extended time to file and pay taxes.

Reasonable Cause

A reasonable cause is one that was beyond the control of the taxpayer. Usually, the IRS accepts causes such as:

  • Death, serious illness or an unavoidable absence of the taxpayer or a member of his or her immediate family
  • Natural disasters that directly impact the taxpayer, or his or her property
  • Personal distress caused by events such as a divorce

Generally, any cause that prevented the taxpayer from filing or paying taxes which was beyond his or her control may be eligible for penalty abatement.

Taxpayer Rights

Taxpayers have the right to challenge an assessment or demand for penalty by the IRS at any stage of the penalty process. Taxpayers have the right to request:

  • A review of the penalty before it is assessed (example: deficiency procedures)
  • A penalty abatement after the penalty is assessed, and either before or after it is paid
  • An abatement and refund after the penalty is paid.

IRS penalties can substantially increase the total amount of back taxes owed. To avoid paying more to the IRS, taxpayers can consider applying for Penalty Abatement. The help of a tax professional may be helpful in understanding the specific qualifying requirements and rules for penalty abatement.


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