Tax Abatement

What Does Tax Abatement Mean?

Every year, the IRS will assess millions of dollars in penalties against taxpayers. This can lead to billions of dollars in penalties alone. You may be eligible for relief from penalties and interest linked to the penalties. Asking for this type of relief with the IRS is known as a tax abatement. A Penalty Abatement is another name for Tax Abatement. The IRS will add penalties to your tax debt when you fail to file or pay your taxes timely. If you have made a willful effort to meet all the tax rules with the IRS but were unable to meet these rules, due to a situation beyond your control, then you should be able to prove reasonable cause. Reasonable cause is a fancy legal way of saying –

What Caused Your Tax Liability?

Keep in mind though, the IRS will not abate general interest based on reasonable cause or the First Time Abatement Request. Interest must be charged by law and will continue to be charged, at a daily rate, until your tax liability is paid in full. Requesting a penalty abatement and getting it approved will quickly reduce the total amount due and any interest that is attached to the penalty only.

Tax Abatement

If you meet the standards for an administrative waiver or first-time abatement, it is for the failure to pay penalty, failure to file a tax return penalty, and failure to make an estimated tax penalty. The late filing penalty may also meet the reasons for relief if it is related to an S Corporation or Partnership. These penalties will fall under the request for a First Time Penalty Abatement. A first-time abatement request can be made over the phone or by writing a story to the IRS.

This waiver is the easiest to get approved based on the overall fact that it was your first time owing a tax balance or having a penalty.  There are a few crucial factors for this waiver to be granted. First, you must not have had a requirement to file a return for 3 years prior. If you did then they must be filed before the request is made. You can’t have any penalties added to your account for the 3 tax years prior to the tax year in which you received the first penalty.

Tax Abatement
Tax Abatement Based

Valid Extension Filed

All currently required returns must be filed or must have a valid extension filed in a timely fashion. Lastly, It is important that you have paid, arranged to pay your tax debt that is due. The failure-to-pay penalty will continue to accrue until your tax debt is paid in full. When you request a penalty abatement based on the First Time criteria, it may be in your best interest to have the tax debt fully paid. This will allow for the penalties to not be re-assessed later on down the line. For example, this can be true when talking about the Failure to Pay Penalty. Once the penalty is removed and the tax debt is still not paid in full, it can be reassessed later for the failure to pay.

Tax Abatement and Reasonable Cause

In addition to the first-time request there are many other reasons that come into play that will qualify you for relief from penalties. These reasons are known as your reasonable cause. A reasonable cause must be a good solid reason as to why the tax debt happened. This cannot be a reason of forgetting or just putting other matters before your tax debts. The reasonable cause must show more than a mere inconvenience. You must be able to back up the reason you were unable to pay your taxes or file a return timely with documents.
Tax Abatement

What Is Considered A Reasonable Cause?

  • Death
  • Serious Illness
  • Unavoidable absence
  • Unable to obtain records
  • Fire

  • Natural disaster or casualty
  • Incorrect written 
  • Oral advice from the IRS
  • Erroneous advice from a certified public accountant 
  • Tax preparer

Undue hardship or Ignorance of the law. Death, Serious Illness or unavoidable absence in the taxpayer’s immediate family may prove reason for late filing or late paying. Providing documents such as death certificate, medical records or leave of absence papers can help support your story. This also applies to a fire or natural disaster that happened in your area. If you are unable to obtain records, due to a situation outside of your control, such as a wildfire, hurricane or snow blizzard you may have reasonable cause.

Ignorance Of The Law

Most of the time when these natural disasters occur, they are reported by the news. Once it's reported on the news you will be able to pull an article for your area to show that you were affected. The IRS will look at the factors of what records were needed in order to ensure compliance. They will also look to see if those records could be obtained by other means. Ignorance of the law can be related to the fact that a taxpayer started a small business for the first time and was unaware of the requirements.

Tax Abatement
If You Are Late on Payments

First Time Payment Penalty

A huge factor that is taken into thought when claiming this reason is the level of your education. The IRS will also consider if this is the first time you have been fined or subject to this kind of tax. When you start a new business most of the time there are requirements that aren’t clearly explained. When this happens, and especially if this is a new field, it is hard to really say if you were aware of what type of tax requirements were needed. There are certain cases were a financial hardship may qualify you for penalty relief. An Undue Hardship will only apply to your late payment penalty.

Undue hardship is not so much of an excuse from filing your tax returns or extension late. You must also prove that the reason for the hardship is something beyond your control. A lack of funds is never a reason to request penalty relief because the tax that is assessed comes from income that you have already received.

Tax Abatement
Make Sure To Have All Your Information

If You Believe You Have Reasonable Cause

If you are looking to request an IRS penalty abatement, make sure that you have all your facts and dates in order. It would be smart to start looking for any documents you have to support your case. If you have a reasonable cause for multiple years, then it would be best to write your request for each year.

When the IRS is reviewing your request there are numerous questions that the they will look to have answered within your story

Some examples of these questions are:

Tax Abatement 8

What happened and when did it happen?  

How did these factors affect your ability to file or pay the federal tax timely?  

Tax Abatement

If the events were only for a closed period of time, what has been done after it ended for you to be compliant?

You must show that you have made all effort to bring your account current with filing your income taxes as well as made arrangements to pay the past due tax liability back. Having a well written story as well as supporting documents can only increase the chances of approval with the IRS.

This is Important For Your Final Step in Tax Abatement

What Is Form 843 and Why Do You Need It?

If you feel that you meet the criteria for a Penalty Abatement, you must fill out and submit Form 843, Claim for Refund and Request for Abatement. If making a written request, you must attach the Form 843 to your well written story. Your story should fit one of the many groups for reasonable cause. Once this info is sent to the IRS, they will review each case on a precise basis. It is very rare that the IRS sees two cases that are the same when asking for relief based on a reasonable cause. A First Time administrative waiver would be more of a generic request rather than a specific one.
Tax Abatement

Omni Tax Help

If you do not know how to make this request, you can contact Omni Tax Help to discuss your reasons for the events that took place. With the help of a trained tax firm on your side, you can have a Power of Attorney assigned to your case to settle the outcome. It is not uncommon that the penalty relief request will be denied the first time it is requested. When this occurs, you have the right to Appeal the IRS’s decision. A Penalty AbatementAppeal is meant to be submitted within 60 days that the original denial notice was sent out. Having a Power of Attorney working your case gives you the comfort of knowing that the dealings with the Appeals officer can be done with confidence. There are many factors that help determine the eligibility to each reasonable cause criteria. A Power of Attorney and/or expert tax professional will make sure that they achieve the best possible outcome based on your personal situation.

Contact Us