PENALTY & ASSOCIATED INTEREST ABATEMENT REQUESTS

The two most common penalties that are assessed are:

• The Failure to File penalty: this is assessed when a taxpayer does not file a tax return on time.

• The Failure to Pay penalty: this is assessed when the taxes owed on a given tax period aren’t paid in full.

There are two main types of penalty abatements:

1) First Time Abatements (or FTA): This type of penalty abatement is the easiest type of abatement for the IRS to grant. It allows for the abatement of penalties and associated interest for one tax year if you qualify. It generally doesn’t require an explanation or justification as to why someone didn’t file or pay their taxes on time, but it applies to Failure to Pay / Failure to File and Failure to Deposit penalties only, not other types of penalties, such as Accuracy-Related penalties.

2) Reasonable Cause Abatements: This type of penalty abatement is exactly how it sounds. A penalty abatement request is made to the IRS based on ‘reasonable cause’, which basically facts and circumstances that prevented you from being able to file and/or pay your taxes on time.

The IRS considers ‘reasonable cause’ on a case-by-case basis, and they are often denied even if they are requested correctly and substantiated. You’ll want to send proof to the IRS for a ‘reasonable cause’ penalty abatement to have the best chance of success. Our office can help you explore if you’re a good candidate and go over the process. Some of the reasons that may qualify for the ‘reasonable cause’ criteria are:

• Fires, natural disasters or civil disturbances

• Inability to get records

• Death, serious illness or unavoidable absence of the taxpayer or immediate family

• System issues that delayed a timely electronic filing or payment