Penalty Abatement is a Possibility

If you have back taxes, you must know that your bill keeps increasing due to added penalties and accrued interest. If you couldn’t afford to pay your original tax debt, why would the IRS think you would be able to now with the additions? Take note that the IRS computer system automatically adds the penalties to your tax bill. Your personal situation are virtually unknown to the IRS. There are options to help you with this IRS problem.

Reasonable Cause

You may convince the IRS to reduce or abate your penalties by showing reasonable cause, which can be done when the taxpayer exercises care and prudence in settling his obligation but is unable to meet those obligations.

By proving to the IRS in logical and legal ways that you attempted to pay your taxes by the deadline but was hindered by circumstance, you’re showing reasonable cause.

Some reasonable causes you can use:

• Acts of God
• Fire, natural disaster, casual, other disturbance
• Wrong advice from the IRS
• Incorrect advice from tax professional
• Inability to obtain records
• Death, serious sickness, or unavoidable absence
• Forgetfulness
• A mistake was committed
• Ignorance of the law

Any reason is satisfactory as long as you were prudent and careful in addressing your obligation but was still unable to comply.

Penalty Abatement Request

When you receive a tax bill with penalties, reply promptly and ask for an abatement. You may fill out Claim for Refund and Request for Abatement (Form 843) or write a letter. Remember to attach a copy of your notice showing the penalties and documentation that substantiates reasonable cause. If you are paying the bill, include a note indicating that the payment is meant for the tax, not the interest and penalties. Also, note this on the check itself. (The interest ceases accruing as soon as the tax is settled.) More bills might be served before you receive a reply, so make many copies of your abatement request and its attachments.

Refusal of your penalty abatement will stop you from sending another request on the same grounds.