How Do I Get Rid of IRS Penalties?

On: February 8, 2019

There are two primary ways to have penalties abated and refunded or waived. The first is what is referred to as a “First Time Penalty Abatement.” As the term implies, it is available to taxpayers who have shown a record of compliance and good behavior who have made a mistake for the first time. The IRS website states: The IRS may provide administrative relief from a penalty that would otherwise be applicable under its First Time Penalty Abatement policy. You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service’s First Time Penalty Abatement policy if the following are true:

• You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
• You filed all currently required returns or filed an extension of time to file.
• You have paid, or arranged to pay, any tax due.

The failure-to-pay penalty will continue to accrue, until the tax is paid in full. It may be to your advantage to wait until you fully pay the tax due prior to requesting penalty relief under the Service’s first time penalty abatement policy. Other administrative relief: If you received incorrect oral advice from the IRS, you may qualify for administrative relief. The second method is by applying for a Claim for Refund and Abatement of Penalty with Form 843. This form is available on the IRS website (irs.gov). The general standard is that you were unable to prevent the action that incurred the penalties. Negligence is not an excuse. The example I like to use is that you were in coma for three years, had extensive expenses to keep you alive, had an annuity that spit out $100,000 per year (all which was used to keep you alive) and you failed to file and pay taxes that were assessed against you by the IRS filing returns on your behalf based on the annuity reporting income to you. They assessed penalties for failure to file and pay your taxes. You wake up and file you taxes and don’t owe anything, but the penalties are still there. Form 843 is the form you would use to have those penalties removed from your account. The above example would most likely satisfy the IRS’ definition of “reasonable cause” for failing to comply with IRS requirements. Penalty Abatement rejections are subject to appeal. I was recently audited by the IRS. Can I get rid of the penalties? There are no penalties directly attributable to being audited. An audit may uncover behavior or lack of compliance that incurs penalties, but these are the penalties addressed in article 33. Certain IRS User Fees may be charged, but this is not considered a penalty and is affected by the individual taxpayer’s ability to pay.