IRS Penalty Relief

One of the things I have noticed over the last several years is that it seems as though the IRS has been issuing more and more IRS notices to taxpayers.  I believe this is a product of the IRS utilizing computers/technology to auto-send these notices.  Regardless of the cause, it isn't uncommon to see an IRS notice anymore.  Many of these notices assess penalties such as Failure to File, Failure to Pay, Accuracy-Related, or other penalties.  If you receive a notice from the IRS that assesses penalties to you - it doesn't necessarily mean that you actually owe those penalties.  You may have gotten the notice in error or you may qualify to have those penalties removed or abated.  The IRS doesn't make it easy for a normal taxpayer to understand why they received the notice, so I encourage you to take the notice to your tax preparer to have them take a look at it before you pay the penalties and interest to the IRS.

How does someone get penalties removed?  There are at least two paths that a taxpayer can take to get their penalties removed.  There is the First Time Penalty Abatement path and the Reasonable Cause path.  If you have never had a notice before and have a clean tax history then, if the penalties qualify, the First Time Penalty Abatement path is almost a guarantee for you that you will have the penalties completely or partially removed.  If you have used the First Time Penalty Abatement path before then you have to plead your case with the IRS with a reasonable cause.  The Reasonable Cause path is less of a guaranteed route to go but I believe that it is always worth asking.  After all, the IRS will never abate or remove any penalties that they aren't asked to remove,  but they might remove a penalty if they are asked.  Asking the IRS to remove a penalty due to reasonable cause reminds me of the quote from Lloyd Christmas, "So you're saying there's a chance?"

To request penalty abatement or relief your best option, realistically, is to have you or your tax preparer write the IRS a letter.  You can also include Form 843 with the request if you so choose.  Adding that form might give you some perceived credibility (that you understand the IRS's process), which might be helpful in getting a favorable decision from the IRS.  You can also try and call the IRS but my experience over the last couple years tells me that you will be waiting on the phone to speak to an agent for a long, long, long time and may never actually get through.  So to avoid wasting your time, I recommend just sending them a letter.  They typically respond in 4-6 weeks with approval or denial of the abatement / penalty relief request.

For additional information about what penalties qualify for First Time Penalty Abatement or Reasonable Cause Penalty Relief I recommend reading these two articles from the IRS's website:

Penalty Relief due to First Time Abate or Other Administrative Waiver

Penalty Relief for Reasonable Cause

If you have received an IRS notice and have any questions about what the notice says, or if you might qualify to have the penalties removed, please don't hesitate to reach out to me.  I love to help people understand their obligations and options when they receive an IRS notice.  So please, reach out if you have any questions.