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Tax Penalty Abatement and Removal

When the IRS assesses tax debt penalties, those penalties are added automatically to the taxpayer's account by the IRS computer system. Because of this, penalties are frequently added to a taxpayer's debt without taking his or her individual circumstances into account. And as you may have already discovered, IRS Tax Penalties can turn a fairly manageable debt into an overwhelming burden pretty much overnight.

Fortunately, the IRS is not completely tyrannical, and if you had an acceptable reason for falling behind on your taxes you may not have to pay the penalties that were assessed to you. If you have already paid off your debt, including the penalties, you may even be eligible for a refund of all those penalties you paid. In order to avoid paying penalties on your tax debt, or to have them refunded back to you, you need to prepare and submit a proper Penalty Abatement request to the IRS.  A Penalty Abatement can also be very effective when combined with some other form of IRS relief, such as a Payment Plan or Offer in Compromise.

HOWEVER, a proper Penalty Abatement requires very specific wording and a solid understanding of the relevant IRS Code and Procedure. Even if you had a good reason for not paying your taxes on time, it is often extremely difficult to get these penalties removed without professional help.

When a taxpayer decides to use our Penalty Abatement service, our goal is to help them get all of the penalties (and possibly some of the interest) either removed from the tax debt or refunded by the IRS. In order to do this, we show the IRS in writing that the taxpayer had "reasonable cause" for not paying the taxes and that he or she has shown "due diligence" and "no neglect" in attempts to repay the debt. We do this in the IRS's own language and apply the relevant sections of the IRS code directly to the client's circumstances, which then requires the IRS agent who reviews the case to drop or refund the penalties. 

Reasonable Cause

The first thing we must establish with the IRS before they will remove or refund your penalties is that you had a reasonable cause for getting behind on your taxes. Listed below is a sample of SOME of the events that the IRS may consider to be reasonable cause for Penalty Abatement. Please look over the following circumstances and see which ones apply to your individual situation. This is not a complete list, it is only a list of some of the most common reasons. Keep in mind: The events must have occurred at the time you fell behind in your taxes and must be related to what caused you to fall behind in your taxes in order to be considered "reasonable cause."

  1. Embezzlement or theft.
  2. Fire, flood, windstorm, riot or other disaster out of your control.
  3. Bad accounting advice.
  4. Lost or destroyed records.
  5. Serious health ailment.
  6. Serious health ailment of a family member.
  7. Death of a close family member.
  8. A divorce that caused a lot of anxiety and upset your financial and/or mental equilibrium.
  9. Caring for someone who cannot care for himself or herself.
  10. Retired or on a fixed income.
  11. Psychological problem that required treatment.
  12. Lengthy period of unemployment.
  13. First time filer of a new tax form. 

Due Diligence and No Neglect

The second thing that must be documented to the IRS is that you have been diligent and not neglectful in your efforts to repay your tax debt. We will need to describe to the IRS exactly what efforts you have made to repay your debt and get back into compliance with the IRS. Obviously, the best situation here would be if you have paid your debt in full and have filed and paid all of your taxes since. However, if this is not the case it does not mean that you do not qualify for a Penalty Abatement. If you are in a Payment Plan or have made some other consistent or significant effort to repay your debt and keep up with your taxes this will often be sufficient to recoup all, or at least a significant portion, of your penalties.

The final thing that you must keep in mind when considering a Penalty Abatement is that after it is submitted to the IRS it will be reviewed by a real person. This person often has the ability to grant or deny your request completely at his or her own discretion. Because of this, it is very important to provide as much proof as possible of your circumstances. For example, if you had a fire or flood it would help your case significantly if you have pictures; or if you had a theft, a police report may help your case. Any documentation you can provide will help your chances significantly. Everyone has the right to request a Penalty Abatement. Naturally, the quality of your story and documentation can greatly affect your chances for getting relief.

National Tax Relief has the expertise necessary to make sure that your Penalty Abatement is accepted by the IRS. We know all of the subtleties of preparing a proper request and sending it to the person who can make it happen for you.


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