What is IRS Penalty Abatement and Penalty Forgiveness?

In 1955, there were approximately 14 penalty provisions in the Internal Revenue Code, today there are more than ten times that number. According to the IRS, penalties exist to encourage voluntary compliance by supporting the standards of behavior expected by the Internal Revenue Code. For most taxpayers, voluntary compliance consists of preparing an accurate return, filing it timely, and paying any tax due. Efforts made to fulfill these obligations constitute compliant behavior. Most penalties apply when a taxpayer fails to meet any or all of these obligations. Generally, the Internal Revenue Service will provide a taxpayer penalty relief or forgiveness for one or more of the following reasons: Reasonable Cause Statutory Exceptions Administrative Waivers Correction of an IRS Error IRS Appeals may recommend the abatement, forgiveness or non-assertion of a penalty based on Hazards of Litigation, in addition to the four reasons mentioned above. A taxpayer may request penalty relief during or after an examination, but before a penalty is actually assessed, with a return that is either filed late or a tax payment that is paid late, or after assessment of the penalty and notification issued. When the IRS receives a request for penalty forgiveness, they will analyze the taxpayers reasons to determine if penalty relief is warranted. The burden of proof is generally with the taxpayer. The request for penalty forgiveness will be evaluated by the IRS based on the events or parties involved. Consideration will be given to whether or not the taxpayer exercised ordinary business care and prudence, but due to circumstances beyond his or her control, was unable to comply with their obligations. A taxpayers request for penalty forgiveness must contain an explanation that pertains to the penalty actually imposed with corresponding dates. If a taxpayers explanation is unclear, the dates do not correspond or the request for relief pertains to a penalty not imposed, the IRS may deny the request for penalty forgiveness. For example: A taxpayer claims that she was unable to comply with the filing requirement due to a death in the family. The death occurred several months prior to the due date of the return. The return was not filed until a year after the due date of the return. -or- A taxpayer claims he was unable to comply with the filing requirement because the records necessary for filing were in the control of a third party, i.e., a bankruptcy trustee or an accountant. The records were returned to the taxpayer well in advance of time the return was required to be filed. The return was not filed until several months after the records were returned. In the above examples the timing of the events and the corresponding dates do not match up and unless other extenuating circumstances exist, the IRS would likely deny a request for penalty forgiveness. Lastly, the Internal Revenue Service will review a taxpayers account to determine if the taxpayer has a history of non-compliance. A history of non-compliance can lead to a request for penalty forgiveness being denied. www.getirshelptoday.com

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YouTube | December 3, 2008

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