Ultimate Guide to IRS Penalty Abatements

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

A Tax Professional’s Guide to IRS Offers in Compromise

Tax debtors have numerous options available to them for resolving their unpaid tax liabilities. While the vast majority of tax debtors will be placed into an appropriate Installment Agreement or into Currently Not Collectible (CNC) status, the Offer in Compromise program provides an amazing opportunity for taxpayers to start fresh with the IRS…if they qualify. In this post, we explore the ins and outs of the Offer in Compromise program from a taxpayer representative’s point of view.

What is an Offer in Compromise?

The IRS Offer in Compromise is a program through which the IRS allows taxpayers to settle their tax liabilities for less than what they owe. The authority to accept less than what is owed is granted by 26 U.S. Code § 7122. Under this statute, taxpayers may submit lump-sum Offers in Compromise to settle their tax debts through a lump-sum payment or periodic payment Offers in Compromise to settle their liabilities through a finite number of periodic payments. If a taxpayer submits an Offer in Compromise to the IRS for a lump-sum, he or she will be required to submit an initial payment with the offer. People who submit periodic payment Offers in Compromise must submit the amount of the initial periodic payment with their offers.

Under IRM 5.8.1, the IRS will accept an Offer in Compromise when it deems the tax liability to be otherwise uncollectible. It may also agree to an Offer in Compromise when there is doubt about the liability owed and to support the effective administration of taxes. The goal of the OIC program is to negotiate a legal payment agreement that is in the taxpayer’s and IRS’s best interest.

Doubt about collectibility

The first ground for approving an offer of compromise exists when the IRS doubts its ability to collect the tax debt because of the taxpayer’s financial inability to pay the full amount owed. Doubt about the collectibility of tax debt may be shown when a taxpayer’s income and assets are insufficient to satisfy the full tax liability. this is the most common ground for making an Offer in Compromise. Some taxpayers who submit Offers in Compromise for tax debts that are deemed to not be collectible can settle their liabilities for a fraction of the total owed. Under IRC § 7122(d)(3)(A), the IRS must not deny an Offer in Compromise when their denial is solely based on the amount that … Continue reading

Introduction to Tax Resolution: A Sweeping Overview of IRS Collections Representation

What is IRS Collections? How much tax resolution work is there to do? What does the tax resolution process look like?

What is the “secret” federal tax lien? How do I resolve tax debt cases? What is CNC? What are the different types of IRS Installment Agreements?

If you’ve had zero prior exposure to IRS Collections representation, then these are likely the types of questions you may be asking yourself. This video, recorded as a live CPE webinar on June 22, 2017, provides a very high level overview of tax debt resolution processes.

Free CE/CPE class: To attend the latest version of this class, in continuing education format, go here.

Watch on YouTube: https://www.youtube.com/watch?v=qm4Bwsc0MpE

Note: Video replays of webinars are not eligible for CE/CPE/CLE credit. Information was accurate as of the date of recording, but since tax laws, regulations, policies, and procedures are constantly changing, please refer to the most recent available guidance for updated information.

Unedited Transcript

Note: This is a raw, unedited transcript of the recording that was produced with an automated transcription tool, not a human transcriptionist. It’s provided merely for reference and to help you find specific sections of the video you might want to jump to.

Good afternoon, everybody. This is Jassen Bowman, and welcome to this presentation of an overview of IRS collections or representation.

Before we get started, I want to let you know, certificates of completion, I’ll get those done over the weekend as well as the IRS reporting. To in to receive your CPE credit, you must answer all three polling questions.

This is usually an issue for the IA’s because you’re not necessarily used to doing this on some of the IRS webinars and whatnot. But now Zarba has stricter requirements than the IRS does for sea completion. So you’ve got to answer the following questions. The handouts of the the slides for today’s presentation are available in the reminder link that were sent to you by go to webinar. They are also available in the handouts, pain of the go to webinar control panel. If you can’t find it, just click on View, then handouts and then you can download it.

If you have questions during the presentation, don’t hesitate to ask via the questions pain.

So the presentation that we’re doing today is kind of a kind of a Frankenstein, actually what I did is I went … Continue reading