Being assessed a tax penalty on top of the taxes you owe can greatly increase your total tax liability. The Internal Revenue Service states that it assesses tax penalties to encourage people to voluntarily comply with the tax laws. You are deemed to be voluntarily complaint when you make a good faith effort to meet your tax obligations. However, receiving a tax penalty can make it difficult for you to pay everything you owe. Fortunately, the IRS provides several methods for seeking an abatement of the penalties you might be assessed.

What are IRS penalty abatements?

Penalty abatement is a process through which you can ask the IRS to remove penalties you have been assessed. There are many different types of penalties that can potentially be abated. However, you have to go through the correct process before your tax penalties will be removed.

If you have been assessed a failure to file or a failure to pay penalty, you will have to request abatement to have the penalty removed. The IRS’s computer system automatically assesses these penalties when you file a return late or when you make a payment with a due balance.

Other types of tax penalties are normally assessed during IRS investigations or audits, including the fraud and accuracy penalties. You can request an abatement of a return accuracy penalty after it is assessed, but you might need to undergo special IRS procedures.

The three primary methods of securing tax penalty abatements include administrative waivers or first-time abatements, reasonable cause abatements, and Form 843 abatements. We’ll take a look at each of these processes below.

Administrative waivers/First-time abatements

If you meet the criteria for a first time abatement, the IRS might provide you with administrative relief for certain penalties, including the failure to file, failure to pay, or failure to deposit penalties. The first time abate program is available to you the first time you are assessed one of these types of penalties on one return. However, you must also meet the following specific eligibility guidelines to receive an administrative waiver or first-time abatement:

• You have filed all required returns or extensions for any returns that are currently due.
• You have made payment arrangements for any currently do taxes or have paid them.

You will be considered current with your tax return filing if you have either filed all tax returns that are due or have filed extensions for them. You cannot have … Continue reading