Abatement of Penalties

If you have ever been late for anything IRS then you have probably gotten a penalty and interest notice stating that you now owe much more than your original tax liability. Impact Tax Resolution has actually seen cases where the penalties and interest on the principle tax liability was substantially more than the original tax assessed.

Are the Penalties and Interest Accurate?

There is just about a penalty for everything; failure to deposit, failure to pay, failure to file, estimated tax, return related penalties and on and on. One of the most important parts of ITR’s process is to be sure the IRS has calculated and assessed the penalties correctly. You will be surprised when a careful examination of penalties and interest is done, that you may have been charged incorrectly or assessed a penalty in error.

Before we discuss what to do in order to obtain forgiveness of penalties it should be noted that it is very rare for the IRS to forgive interest on your original tax liability unless it can be shown that you acted on faulty advices given by the IRS or they somehow delayed a managerial or ministerial act. But you will have to prove it.

The Penalties and Interest are correct now what?

If it is determined that penalties and interest are correct then the next step would be to see if there is any possibility to abate them. The Internal Revenue Manual spells out how to go about abating penalties and interest. ITR will help you tell your story in a manner consistent with the process that will give your abatement request a chance at approval.
One of the most common forms of abatement is base upon reasonable cause. The Internal Revenue Manual says that reasonable cause is based on all the facts and circumstances in each situation and allows the IRS to provide relief from a penalty that would otherwise be assessed. Reasonable cause is generally granted when the taxpayer exercises ordinary business care and prudence in determining their tax obligations but is unable to comply with those obligations.

Ordinary Business care and prudence

There are many different reasons for a reasonable cause, which we will cover below. For each reason, you must establish that you exercised ordinary business care and prudence. So what doe that mean? Some of the variables the IRS is going to consider when trying to establish if ordinary business care and prudence was indeed taken are:

Your reason: Generally dates and explanations should correspond with events which penalties are based; there may be exceptions given additional information.

Compliance History: Do you have a pattern of non-compliance? If that is the case it may be hard to justify ordinary business care and prudence. That does automatically mean you did not have a reasonable cause or act with ordinary business care and prudence. It may be harder to prove. ITR takes the time to put together an abatement letter that has chance of being approved and negotiated in appeals if needed.

Time: What is the time frame between your reasonable cause of compliance failure and when you returned to being compliant?

What circumstances were beyond your control: Could you have anticipated the situations and events that caused your compliance failure? Did you try to get back on track and timely meet your tax obligations?

Reasonable Causes

The IRS list many different reasons for reasonable cause, below are just a few. ITR will review your circumstances and help fashion an argument as to why the IRS should forgive your penalties.

  • Ignorance of the Law
  • A Mistake was made
  • Forgetfulness
  • Serious Illness, Death, or Unavoidable Absence
  • Unable to Obtain Records
  • Incorrect Advice from a Competent Tax Professional
  • Incorrect Advice from the IRS
  • Fire, Casualty, Natural Disaster, Other Disturbance
  • Acts of God

This list is not an exhaustive list of reasonable causes. Remember for every cause that you list you must be able to show that you acted with ordinary business care and prudence. If you believe you may have grounds for penalty relief, ITR will submit an abatement request on your behalf.

Privacy Policy: Impact Tax Resolution will use the information you submit to contact you, to provide a free consultation concerning how to best resolve your tax liability. Please notify us in writing if you would like to opt-out of future communications, or modify or delete information you have submitted to us. After Impact Tax Resolution has been hired by you to resolve your tax matter, Impact Tax Resolution may share your information with third parties to help facilitate the resolution of your tax liability. Your personal information will only be used in accordance with resolving your tax liability.

Should you have any questions concerning this policy please feel free to contact us.

Are the Penalties and Interest Accurate?

There is just about a penalty for everything; failure to deposit, failure to pay, failure to file, estimated tax, return related penalties and on and on. One of the most important parts of TRN’s process is to be sure the IRS has calculated and assessed the penalties correctly. You will be surprised when a careful examination of penalties and interest is done, that you may have been charged incorrectly or assessed a penalty in error.

Before we discuss what to do in order to obtain forgiveness of penalties it should be noted that it is very rare for the IRS to forgive interest on your original tax liability unless it can be shown that you acted on faulty advices given by the IRS or they somehow delayed a managerial or ministerial act. But you will have to prove it.

The Penalties and Interest are correct now what?
If it is determined that penalties and interest are correct then the next step would be to see if there is any possibility to abate them. The Internal Revenue Manual spells out how to go about abating penalties and interest. TRN will help you tell your story in a manner consistent with the process that will give your abatement request a chance at approval.
One of the most common forms of abatement is base upon reasonable cause. The Internal Revenue Manual says that reasonable cause is based on all the facts and circumstances in each situation and allows the IRS to provide relief from a penalty that would otherwise be assessed. Reasonable cause is generally granted when the taxpayer exercises ordinary business care and prudence in determining their tax obligations but is unable to comply with those obligations.

Ordinary Business care and prudence
There are many different reasons for a reasonable cause, which we will cover below. For each reason, you must establish that you exercised ordinary business care and prudence. So what doe that mean? Some of the variables the IRS is going to consider when trying to establish if ordinary business care and prudence was indeed taken are:

Your reason: Generally dates and explanations should correspond with events which penalties are based; there may be exceptions given additional information.

Compliance History: Do you have a pattern of non-compliance? If that is the case it may be hard to justify ordinary business care and prudence. That does automatically mean you did not have a reasonable cause or act with ordinary business care and prudence. It may be harder to prove. TRN takes the time to put together an abatement letter that has chance of being approved and negotiated in appeals if needed.

Time: What is the time frame between your reasonable cause of compliance failure and when you returned to being compliant?

What circumstances were beyond your control: Could you have anticipated the situations and events that caused your compliance failure? Did you try to get back on track and timely meet your tax obligations?

Reasonable Causes

The IRS list many different reasons for reasonable cause, below are just a few. TRN will review your circumstances and help fashion an argument as to why the IRS should forgive your penalties.

  • Ignorance of the Law
  • A Mistake was made
  • Forgetfulness
  • Serious Illness, Death, or Unavoidable Absence
  • Unable to Obtain Records
  • Incorrect Advice from a Competent Tax Professional
  • Incorrect Advice from the IRS
  • Fire, Casualty, Natural Disaster, Other Disturbance
  • Acts of God

This list is not an exhaustive list of reasonable causes. Remember for every cause that you list you must be able to show that you acted with ordinary business care and prudence. If you believe you may have grounds for penalty relief, TRN will submit an abatement request on your behalf.

Privacy Policy: Tax Resolution Network will use the information you submit to contact you, to provide a free consultation concerning how to best resolve your tax liability. Please notify us in writing if you would like to opt-out of future communications, or modify or delete information you have submitted to us. After Tax Resolution Network has been hired by you to resolve your tax matter, Tax Resolution Network may share your information with third parties to help facilitate the resolution of your tax liability. Your personal information will only be used in accordance with resolving your tax liability.

Should you have any questions concerning this policy please feel free to contact us.