Unexpectedly receiving a penalty charge notice in the mail can cause a shock. Taxes (especially for business owners) can be difficult to navigate, and even if you try your best, you may file something wrong. Fortunately, if you find yourself with a penalty, paying isn’t the only option available to you.
Penalty abatement is a written request to the IRS, or FTB, to remove or eliminate a penalty assessed to you. While not everyone can receive penalty abatement, everyone can at least try to seek relief by filing a request.
Common Penalties From Which to Seek Relief
The IRS collected 37.3 billion dollars in civil tax penalties in 2021 alone. Plenty of people are in the same boat as you. When people seek penalty abatement relief from tax penalties, the most common penalties include the following:
- Information return incurs if you miss filing information returns, or fail to give payee statements promptly.
- Failure to timely file incurs when you don’t file your tax return by April 15th (or by the date of your extension).
- Failure to timely pay incurs when you don’t pay owed reported tax by the due date, or the date of your extension.
- Accuracy-related incurs when you don’t pay enough to fulfill tax requirements. This happens if you forget to report a stream of income, or if you take deductions for which don’t qualify.
- Failure to timely deposit incurs when employers don’t do employment tax deposits correctly.
- Foreign information return penalties incurs if you have money or revenue from foreign sources, and you fail to follow tax rules and regulations in reporting it.
However, anyone with any penalty can seek penalty abatement. Even if you have a rare case, or uncommon penalty, if you believe the cause is unwarranted, file for penalty abatement.
How to File for Penalty Abatement
To file for penalty abatement, you need to fill out form 843 (Claim for Refund and Request for Abatement). This must be completed by the taxpayer in-full and timely, as soon as you receive your penalty charge notice. With this form, you’ll need to include the type of penalty that you want to be removed, how much you were charged, and a detailed version of the events.
You need to outline specific facts and circumstances of your situation to prove to the IRS why they were wrong in charging you a penalty, or why they should remove the penalty charged (if you were unaware of certain laws or requirements, that’s a good reason to state).
You’ll also need to include your contact and some identifying information, including:
- Name
- Address
- Social security number
- The tax year
Documents to Attach to a Penalty Abatement Letter
The documents attached to a penalty abatement letter vary based on the penalty. These are decided based on why the penalty was imposed, and your explanation.
For example, if the penalty imposed was failure to timely return, then you need to attach proof the return was mailed timely. If you didn’t mail it on time, you need to prove why you couldn’t. A medical emergency is reasonable proof that you were unable to file the return on time. Documents proving a hospital stay would provide evidence for why you couldn’t file a tax return.
What to Do if Abatement is Denied
If abatement is denied, you have to file for an appeal. Appeals are covered by a separate department with the IRS, and FTB, so it’s your chance for a second opinion.
If I’ve Already Paid, Can I Still File for Penalty Abatement?
If you’ve paid for all or part of your penalty, you can file your claim for penalty abatement within 2 years of each payment. In general, a penalty can be abated in-part or in-full. It’s not all-or-nothing.
If you haven’t paid yet, you don’t have to pay the penalty before filing for abatement.
To ensure that you correctly state your case and evidence in your penalty abatement letter, work with tax lawyer Mindy Meigs. She can help you write a letter and provide evidence the IRS will approve. Contact Mindy today, so you can send your penalty abatement letter to the IRS promptly, and get your money back.