Many clients who come into our Richardson TX office with Tax Problems, have tax penalties that are part of their IRS debt, and want to know how to remove them. In some cases, it is possible to remove penalties for late filing and payment. Today, we’ll discuss some of the reasons that the IRS will allow abatement (removal) of Tax Penalties.
First Time Penalty Abatement
If the taxpayer qualifies, this is typically the easiest way to remove a penalty. The First Time Penalty Abatement (FTA) is available for 3 penalties –
- Failure to File
- Failure to Pay
- Failure to Deposit (Payroll Deposits)
The IRS Website states that you may qualify for relief from penalties if the following are true –
- You didn’t previously have to file a return, or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
- You filed all currently required returns or filed an extension of time to file.
- You have paid, or arranged to pay, any tax due.
Reasonable Cause
If a taxpayer does not qualify under the First Time Penalty Abatement alternative, they may still qualify if it is found that they had Reasonable Cause for the event which triggered the penalty. To qualify for reasonable cause, the taxpayer must be able to show that they attempted comply with the IRS compliance issue, but were unable, due to reasons beyond their control. Some common examples of reasonable cause that the IRS’s website lists include –
- Fire, casualty, natural disaster or other disturbances
- Inability to obtain records
- Death, serious illness, incapacitation or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family
- Other reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so.
The important factor is to be able to prove that reason for non-compliance was beyond the taxpayer’s control. In most cases, you will be required to provide documentation that supports your claim.
Do You Need Help?
If you need help with a Tax Penalty Relief or other IRS Collection issue, I’d be happy to talk with you. Please give me a call at (972) 821-1991 or email me at bob@jablonskyandassociates.
