When the IRS levies any penalty on the taxpayer, then they also have this option to ask for its waiver in some cases. Penalty abatement is a tool through which a taxpayer can challenge the IRS assessment in their penalties whenever applicable. There are many cases when the waiver is possible. However, there are certain rules that you must know about penalty abatement and therefore, this article is your savior.
If you are looking for penalty abatement, then you are at the right place. In this article, we will discuss some of the important reasons and causes of IRS waiver. If you are in Meridian, you can also consult tax resolution Meridian ID to know more about the waiver.
Table of Contents
What is Penalty Abatement?
There is an option of penalty abatement if there is proper demonstration that your failure to comply with the tax was due to some reasonable reasons rather than a willful neglect. It needs to have a reasonable cause showing what are the exact reasons for not paying the taxes. Some of the important examples of reasonable reasons can be like illness, family issues, natural disasters, or in extreme cases there can be reasons for the death of very dear ones. If there are genuine reasons then the penalties can be waived. In such cases the interests associated with the penalties can also be waived if the penalties are waived.
What are the Reasonable Causes?
The IRS may consider waiving the penalties if there is a reasonable cause. So, if there are situations when the situation is not in control of the taxpayer’s ability to control such as fire, natural disaster and other such factors that will prevent the taxpayer from filing or paying the taxes. If there is serious illness or death of an immediate family member, then they may also be considered under reasonable causes. It is also important to note that the IRS does not consider lack of funds as a reasonable cause for penalty abatement.
It would be better for you to prove your reasonable cause through proper documentation. There will be proper investigation of the causes like they can check the hospital records for documentation or of the natural disaster. There must be proper discussion about the situation and the taxpayer must be prepared to explain the circumstances that prevented them from filing or paying taxes.
What is First-Time Penalty Abatement?
If there is a business or an individual who has clean compliance histories, then they may be able to receive administrative relief from penalties that are associated with the late filing or payment. If you want to receive first-time abatement, then you have to show that there are no significant tax penalties in the three years prior to this penalty.
In addition to this, you must also show a clean compliance history that you need to fulfill to meet the further criteria that is to be considered for first time abatement. You should have filled all the required tax returns, must have paid or arranged to pay any tax dues. To request a waiver, you can connect with the IRS department and provide a written request explaining your needs.
What are Key Tips to Request Penalty and Interest Waiver?
You must be prompt in your request. As soon as you get the penalty notice, you must not delay in requesting the abatement once you realize that the penalties or the interests have not been assessed properly. You must provide proper documentation requesting for the abatement for stating the reasonable cause and also provide complete evidence. Gather medical records, disaster proof or other such documents that will show your genuine cause.
In addition to this, you can also stay compliant and improve your chances of getting a penalty waiver. You must make sure to fill your tax returns and stay up-to-date with the current payments so that your chances would be increased for penalty waiver.
