IRS penalties, and the associated interest, can sometimes run as high as forty or fifty percent of your total liability. Boxelder Consulting's team of licensed professionals have handled thousands of penalty abatement cases with resounding success. We can take this weight off your shoulders by gathering the necessary paperwork, filing the request for a penalty abatement, and then negotiating directly with the IRS on your behalf.
Penalty Abatement Overview
Penalties and interest can compound problems exponentially if you have a long history of unfiled returns or are unable to address an existing tax debt. In our experience representing business owners, payroll tax liability is the most common infraction and unfortunately, one of the most heavily penalized. Penalties for “failure to pay” and “failure to file” range from 33% to 40% of the total liability. In situations like these, paying back penalties can seem like an insurmountable task.
If your tax debt has snowballed out of control because of accrued penalties and interest, negotiating a penalty abatement with the IRS is an option that could save you a significant amount of money.
If you don’t know where to start, give Boxelder Consulting a call. Our team of licensed professionals has handled thousands of penalty abatement cases with resounding success. We can take this weight off your shoulders by gathering the necessary paperwork, filing the request for a penalty abatement, and then negotiating directly with the IRS on your behalf.
How to Qualify for Penalty Abatement
In order to qualify for penalty abatement, you’ll need to prove there was reasonable cause for filing or paying late. The IRS will make an exception for first offenders too; in other words, if you have a clean track record of filing and paying your taxes on time, the agency will take this into consideration during the penalty abatement review. This is called a First Time Abatement, and we will discuss this option below. A lack of funds, in and of itself, is not reasonable cause for failure to file or pay on time. However, the reasons for the lack of funds may meet reasonable cause criteria for the failure-to-pay penalty.
The most common situations that fall under the reasonable cause category are as follows:
Errors Caused by the IRS
The IRS is known to make mistakes from time to time. If your tax liability is a result from an IRS error, you may use this as reasonable cause to apply for a penalty abatement. The same goes if the IRS is responsible for unnecessary delays during your assessment.
Fire, Casualty, or Natural Disaster
Natural disasters usually strike when you least expect it and can come in many forms. If you were hit by a house fire, or lived in an area that was severely damaged by a natural disaster (hurricane, tornado, flood, riot, etc), you have reasonable cause to qualify for the penalty abatement.
Death or Illness
The IRS considers the death of a close family member as a sound reason for filing and paying taxes late. If you’ve recently lost a loved one, or are currently battling a serious illness yourself, the agency will take this into account as reasonable cause for the qualification of penalty abatement. Please note that the death or illness of unrelated friends and acquaintances is not a sufficient enough cause to plead your case before the IRS.
Major Life Disruptions
The IRS defines a major life disruption as any unforeseen event that causes an extreme financial disturbance for the taxpayer. Major life disruptions include (but are not limited to): incarceration, separation/divorce, or a lengthy time of unemployment.
First Time Abatement
The IRS offers a “no questions asked” First Time Abatement (FTA) if you have been clean for the previous three years of tax returns. For example, let’s say you had a one time issue that hit you in 2016 such as a divorce or illness and you filed your Form 1040 personal income tax return late. In order to qualify for an FTA, you must have had no penalties assessed in the prior three years, in this example – 2013, 2014 and 2015.
Request for Abatement & Refund – Forms and Instructions
Should you have reasonable cause for not filing or paying your taxes on time, you can request a penalty abatement by contacting the IRS either by phone or in writing. However, the most common method is through the submission of Form 843 (Request for Abatement & Refund).
If you don’t know where to start, give Boxelder Consulting a call. Our team of licensed professionals can take this weight off your shoulders by gathering the necessary paperwork, filing the request for a penalty abatement, and then negotiating directly with the IRS on your behalf.