One of the most common tax burdens for delinquent filing and paying taxpayers are IRS tax penalties and interest charges. Getting the IRS to reduce, compromise or eliminate IRS tax penalties or interest is a very effective way to lessen your back tax debt. This is called IRS Penalty Abatement. A penalty or tax abatement is defined as the forgiveness of penalties that have been added on to an original IRS tax debt over time. While the interest charged by the IRS has historically not been unreasonable, IRS tax penalties can quickly make a tax debt completely unmanageable. IRS penalties assessed can be as high as 25% of the tax liability amount. These IRS penalties are assessed at a rate of 5% per month if your IRS tax return is more the 60 days late. This IRS tax penalty is called the Late Filing Penalty or Failure to File Penalty and is often the cause of a quickly mounting IRS tax debt problem. The Failure to Pay Penalty, often called the IRS Late Payment Penalty, is a penalty calculated by the IRS based on the actual amount of tax you owe. The IRS late payment penalty is 0.5% for each month the tax is not paid “in full” and there is no maximum limit. The Failure to Pay Penalty is calculated from the original payment deadline, typically April 15th, until the tax liability is paid in full.

The good news is that the IRS is willing to consider reducing or waiving tax penalties and will allow you to present your “reasons” for falling behind, which then caused you to incur tax penalty and interest charges. This is called Reasonable Cause. According to the IRS, there are numerous categories in which your reasonable cause may be classified. These categories include: death of a family member or yourself, serious illness of you or a family member, unavoidable absence, civil disturbance, lack of funds, reasons beyond your control that caused an inability to determine your tax, incorrect advice from a competent tax professional, acts of God, unable to obtain records, and “other reasons” for not complying within the time limit. You may also request tax penalty abatement when you relied on incorrect advice given by the IRS over the phone. You must be able to prove to the IRS that your reliance was reasonable and that it caused you to suffer more taxes, tax penalties or interest.

If a taxpayer meets the requirements for IRS penalty abatement, they will be required to file several documents. There are three ways that a delinquent taxpayer can actually present their tax penalty abatement case to the IRS. They are (1) written petition which in is the form of a letter often called the IRS Letter of Abatement and is the most common method, (2) oral interview which is an “in person” meeting with the IRS and (3) filing IRS Form 843 Claim for Refund and Request for Abatement. Regardless of the method you choose, you will be required to explain in detail the reason (reasonable cause) you failed to pay your tax liability on time. Documentation is required to provide support for your reasonable cause. Keep in mind that if you have already paid your tax debt in full, you may even be eligible for a refund of IRS penalties and interest.

Why use tax professionals for your IRS penalty abatement? Convincing the IRS to abate penalties and interest is not as easy as you may hope. The IRS does not part with back tax liabilities easily and any request for IRS tax penalty or interest abatement is carefully scrutinized. You don’t have to fight the IRS alone while struggling to figure out how to reduce or eliminate your penalties and interest. Professional IRS tax representation will maximize your chances of getting your tax penalty abatement approved. IRS tax specialists have the knowledge and industry experience to help you achieve this vital financial goal. Our affiliated tax advisors know how to reduce or eliminate IRS tax penalties and interest. They are experts in drafting the IRS letter of abatement, filing Form 843, and will vigorously fight for your rights as a taxpayer!