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IRS Penalty Abatement

The Internal Revenue Code imposes various penalties, ranging from civil fines to imprisonment for criminal tax evasion to non-complying taxpayers. Penalties are generally payable upon notice and demand. Penalties are assessed, collected and paid in the same manner as taxes. The notice will contain the name of the penalty, the applicable code section, and how the penalty was computed (or information on how to obtain the computation if not included).

The law permits the IRS to remove or reduce the penalties applied to a taxpayer's account if the taxpayer can submit a written explanation with an acceptable reason as to why the IRS should remove or reduce the penalties. The taxpayer has the burden of showing that his failure to comply with the relevant tax laws, such as failure to file a timely return or filing of a legally deficient return was due to “reasonable cause.” Reasonable cause if presumed when the taxpayer exercised “ordinary business care and prudence” in the handling of filing and payment of their taxes and were nevertheless unable to comply due to circumstances beyond their control. The question of what constitutes “ordinary business care and prudence” requires a very specific factual inquiry into taxpayer’s actions in support of his contention. Generally, this means a taxpayer has a good filing and payment history with the department, the condition which created the assessment is not a chronic problem with that taxpayer, and there are specific reasons why this particular return was not filed and paid timely. There is no statutory provision for abatement of interest based on reasonable cause.

Who May Request Abatement of Penalties?

Any taxpayer who files either a personal income or business tax return and is assessed a penalty. If there is potential for reasonable cause, we will write to the IRS department on behalf of our clients and provide specific information on the incident or event causing the penalty assessment.

Situations Where Reasonable Cause May Exist:

Circumstances beyond the control of the taxpayer while using reasonable and prudent business practices.

  1. Mathematical errors. A mathematical error on a timely filed tax return.
  2. Unexpected illness of taxpayer or his immediate family or unavoidable absence of the taxpayer.
  3. Death in taxpayer’s family.
  4. Absence of records.
  5. Taxpayer's financial difficulties.

There following civil penalties are imposed on taxpayers:

  1. Civil Fraud Penalty.
  2. Accuracy Related Penalties.
  3. Penalty for Filing Frivolous Tax Returns.
  4. Delinquency Penalties. (Penalties for filing or paying taxes late)
  5. Penalties for Underpayments in and Deposits of Estimated Payments.

The bottom line is that you must report all your income, file your return and pay your tax by the due date to avoid interest and penalty charges.

If you owe an outstanding tax liability, most likely, various tax penalties have been assessed against you as well. If you wish to abate your penalties, please contact us 1-855-GSA-TAXHELP (1-855-472-8294) for help.

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