Understanding IRS Penalty Abatements

When you fail to pay your taxes on time, you can incur extra charges in penalties and interest. Although the interest rate is not too high, the amount you owe in tax debt continues to increase with each passing day. When this happens, you can easily find yourself in a situation where the amount payable as tax is far too much to pay off. However, there’s no need to panic! If you’ve fallen behind on your taxes for legitimate reasons, like hundreds of other Americans, you can use an IRS penalty abatement to get tax relief.

Tax Abatement Definition

A penalty or tax abatement can be defined as forgiveness of the penalties associated with tax debt that have been added on by the IRS over the course of the debt. Sometimes, the IRS will agree to remove some of the penalties that were assessed. In certain situations, they will even go as far as to revoke the extra charges altogether. Therefore, with the help of penalty abatements, which can also include property tax abatement and federal tax abatement, you can either be forgiven for the full tax penalty amount, or part of the amount you owe. This can help to significantly lessen your financial burden.

Requesting a Penalty Abatement

The documentation used to request IRS penalty abatement is Form 843. This form asks applicants to fill out the following types of details:

  • Name
  • Address
  • Social Security Number
  • Tax years in question
  • Reason for tax abatement

In addition to filling out form 843, there are also other things you have to do in order to qualify for IRS penalty abatement. Above all else, you must be able to provide a valid reason for being awarded with tax abatement. Therefore, you will need to provide proof of the extenuating circumstances that prevented you from paying your taxes on time. The IRS also requires you to submit supporting documentation along with your tax abatement request form. This can include any penalty notices you may have received, as well as all necessary documentation showing reasonable cause for being late on the payment.

Reasons for Penalty Abatements

As a taxpayer, it’s your responsibility to be aware of your own tax situation; therefore feigning ignorance is not an acceptable option, especially with the IRS. The reason(s) provided to the IRS for tax abatement must be genuine. That being said, many people do have legitimate reasons for being unable to pay their taxes on time.

Valid grounds for getting IRS penalty abatements usually involve enduring serious hardships, such as the following:

  • Hospitalization
  • Death in the family
  • Natural disasters
  • Long-term unemployment
  • Misplaced financial records
  • IRS tax mistakes

Once you file the necessary paperwork, you will need to wait for some time. The IRS typically responds to penalty abatement requests within a period of two months. Keep in mind that everyone’s need for penalty abatement is different, which is why what the IRS may deem as acceptable will depend greatly on your individual situation. There are no guarantees that they will remove or even reduce your tax penalties and interest. All you can truly do is try to put your best case forward and hope for the best. However, as long as your need for penalty abatement is genuine, you will have a good chance for tax relief.