Penalty Abatement is the full or partial removal of IRS penalties by the IRS under special circumstances. Taxpayers under tax debt can get their penalties reduced or removed to decrease their total tax debt amount. The IRS considers Penalty Abatement if there is a “reasonable cause” for the non-compliance. A reasonable cause is any reason for the non-compliance that was beyond the control of the taxpayer.
Abatement of penalty helps taxpayers substantially reduce the tax debt amount to be paid. As the amount of penalties will continue to increase over time, their reduction or removal helps taxpayers to pay their tax debt more comfortably. Penalty Abatements are popular because if a taxpayer has authentic reasons for the non-compliance, the IRS has to accept them and either reduce or remove the penalties.
A reasonable cause includes:
- Natural disasters, fire, theft, casualty or other disturbances beyond the control of the taxpayer
- Death in the family that deeply affected the taxpayer
- Divorce that deteriorated the financial and mental well-being of the taxpayer
- Erroneous advice from a tax advisor
- Erroneous oral or written advice from the IRS
Penalty Abatement can be achieved for any reasonable cause. The judgement of whether or not a cause is considered reasonable depends on the IRS officer reviewing the case.
Taxpayers seeking tax debt resolution should explore Penalty Abatement to see whether they can qualify for one to reduce their tax debt. If the non-payment of taxes was due to an unavoidable reason, they are likely to qualify for Penalty Abatement.