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IRS Penalty Abatement – Frequently Asked Questions


What is an IRS penalty abatement letter?


This is a written request that is submitted to the IRS in an attempt to reduce or remove the tax penalties that have been assessed to an account.


What is an IRS penalty abatement reasonable cause letter?


This is a formal request for the abatement and/or refund of penalties on a tax account. Reasonable cause must be shown to receive proper consideration for the reduction or removal of penalties. Not all penalties qualify for reduction and not all situations may receive consideration for an abatement. Understanding reasonable cause criteria is key in succeeding with the abatement process.


What is the IRS penalty handbook?


Internal Revenue Manual (IRM) Section 20.1, Penalty Handbook, provides information on the assessment of penalties, the amount of such penalties, and the consideration for the abatement of penalties for all taxpayers. This is the main source for the management of penalties by the IRS.


What is IRS one-time forgiveness?


The IRS offers forgiveness for failure to file, failure to pay, and federal tax deposit penalties as long as the taxpayer did not previously accrue penalties on the same type of tax form in the three previous years. This one-time forgiveness is only offered to individuals and businesses that are in a tax compliant status.


What are the IRS penalties for underpayment?


Individuals’ Estimated Tax Payments are due on April 15th, June 15th, September 15th, and January 15th (of the following year) if the total tax due is greater than $1,000 or if there was a tax liability the previous year. A penalty will be assessed if the withholding amount for a quarter, plus any overpayments applied from other periods, is less than the tax owed for that period. This amount will vary depending on the amount of tax underpaid.


What are the IRS penalties for not filing?


Failure to file penalties are placed on an account at a rate of 5% per month that the return is late (IRC 6651). This penalty is not placed on the account until after the tax return is filed.


What are the IRS penalties for late filing?


The minimum penalty is the smaller of $135 or 100% of the unpaid tax showing on the tax return (if more than 60 days late). Late filing penalties accrue at a rate of 5% of the total tax owed each month the return is late.


What is an IRS Form 843?


The most common reason why a Form 843 is used by taxpayers is to request an abatement and/or refund of penalties and fees on an account. However, in some more unique circumstances, this form may be used to request removal of certain taxes or interest. This is more rare and success is only found if proper merits are shown.


When requesting an abatement of penalties, you must include the Internal Revenue Code (IRC) section on which the penalty is based and provide a good explanation as to why the penalty was assessed in the first place. There must be reasonable cause in order to receive proper consideration for the abatement. These reasons will range from a natural disaster or serious illness; though in some cases you may receive consideration for extraordinary economic financial hardship.


When submitting the request to the IRS, you must include the following information:


  • Your name, address, Social Security Number or Employer Identification Number
  • Spouse’s information if it is a joint request
  • Tax period and amount to be abated/refunded
  • Type of tax or fee or type of penalty
  • Original return information
  • Thorough explanation as to why the request is being filed


Separate 843 forms will need to be filed for separate tax years.


Additional Questions?


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