"Did You Know?" #11, Part 2
DID YOU KNOW the IRS can “abate” certain penalties?
There are many ways to incur a penalty from the IRS. Three of the most common penalties are:
Failure to File your individual, partnership, or S Corp return on time,
Failure to Pay the tax that you owe on time
Failure to Deposit taxes (pertains to employers)
If you have good tax compliance and haven’t received any penalties in the last three years, you can ask for a “First-Time Penalty Abatement” of these three penalties. The key here is that you must ask. Sometimes you can request this over the phone. You can call the IRS at the number listed on your letter or notice. If you don’t have the letter or notice, you can call 1-800-829-1040. Or you can submit a Form 843 Claim for Refund and Request for Abatement to ask for this first-time abatement. Please note that the processing time for this will be much longer than if you ask by phone.
If you don’t qualify for the first-time abatement (either you haven’t been compliant for the last three years or you have a different kind of penalty than the three listed above) you may request a Reasonable Cause Penalty Abatement. You must explain on the Form 843 Claim for Refund and Request for Abatement the reason you believe you qualify. Some reasons considered include serious medical conditions, stolen or destroyed documents, inability to get records, and death or serious illness of a close family member. You must submit proof with the form. Some reasons specifically not considered are reliance on a tax professional, lack of knowledge, mistakes /oversights, and lack of funds. If you are denied the reasonable cause penalty abatement, you can appeal that decision.
To read more about this process, see https://www.irs.gov/payments/penalty-relief-due-to-first-time-abate-or-other-administrative-waiver#qualify and https://www.irs.gov/payments/penalty-relief-for-reasonable-cause.