- Glossary
- Penalty Abatement
Penalty Abatement
The IRS may waive the penalty for your delinquent taxes if you as a taxpayer meet certain requirements. Penalties may apply if you miss a payment deadline, file your taxes late, or file your taxes incorrectly. As a result, the IRS may impose a penalty on you similar to those listed above. If you are qualified, a penalty abatement allows you to avoid these penalties.
It is much simpler to be approved for and receive a penalty abatement when you have a seasoned tax lawyer from Fincent Tax on your side. Tell us about your current tax status, and we'll work together to find a solution.
Types of Penalty Abatement
Depending on the penalty, the IRS may grant you one of the following forms of penalty reduction:
First time Penalty Abatement
- If this is the first time you have filed or paid a tax return late and you meet other qualifications, you might be eligible for this sort of penalty abatement.
- For more information, visit the First Time Penalty Abatement section of the IRS website.
Reasonable cause
- The IRS will take into account any reasonable circumstance that prohibits you from timely filing your tax return, making a deposit, or paying your tax when due.
- Natural disasters, difficulties to collect records, and serious illness of the taxpayer or a family member are examples of reasonable cause scenarios.
- You can get more information on the IRS website Penalty Relief Due to Reasonable Cause.
Statutory Exception
- A statutory exception to a penalty may be provided by certain forms of tax legislation.
- You may also be eligible for this relief if the IRS provided you with inaccurate written guidance.
- For further information, visit the IRS website's Penalty Relief Due to Statutory Exception section.
How to Apply for Penalty Abatement
Lyons says you can request a first-time penalty waiver by contacting or writing to the IRS. If you call, you may get an immediate response, but make sure to collect the agent's name and phone number and then follow up with a written letter, he advises. If you've already received an official IRS notice about your penalty, there should be a phone number on the upper right-hand side of the letter.
And don't be concerned about haggling. "There is no negotiation; it is all or nothing." "You either qualify or you don't," Jim Buttonow, a certified public accountant in Summerfield, North Carolina, says.
Buttonow warns that the IRS may have added interest to your balance. "However, if interest accrues from the failure-to-pay or failure-to-file penalty that is owed, the associated interest will be abated as well," he explains.
How to Qualify for Penalty Abatement
According to the IRS, if you sought to comply with tax regulations but were unable to pay your tax responsibilities due to circumstances beyond your control, you may be eligible for penalty relief. However, the IRS claims that the majority of penalty waivers fall into four categories:
- Reliance on incorrect IRS instructions
- Statutory and regulatory exemptions from the penalty imposed by tax laws
- Administrative waivers to facilitate tax administration, such as first-time penalty abatement and hardship failure to pay penalty relief, are available.
- Reasonable motive
Taxpayers who have had no past compliance issues and have been assessed penalties for failure to file, failure to pay, or failure to deposit are eligible for a first-time penalty abatement.
You must also meet the following requirements:
- You had no fines for the three tax years before the year you incurred the penalty or were not obliged to file a return.
- You have filed all of the required returns or requested a filing extension.
- You have paid or agreed to pay the tax.