How to Abate IRS Penalties
IRS's Automated Penalty Notices
IRS penalty notices are often automatically generated by a computer and sent to inform a taxpayer that they owe a penalty, how much they owe, and why they owe it. There is no human interaction behind most of these notices, just a mathematical formula.
Computer generated penalty notices offer a skilled tax attorney an advantage, because the attorney controls which facts to present that the computer formula didn't take into account. For example, an attorney can show that the IRS formula failed to consider the fact that the lawyer's client was experiencing undue economic hardship from an injury and needed to deplete funds that were set aside to pay the IRS.
How Long does a Taxpayer have to Request a Penalty Abatement
The law does not set a time limit on how long people have to respond to IRS penalty notices, but if the penalty is assessable then the money is owed upon the IRS asserting that it is due without any administrative warnings or proceedings. Therefore, if a taxpayer does not respond to an IRS penalty notice, nor pay the amount due, the IRS will commence collection activity to recover the penalty money. Once the IRS collects the penalty money, the taxpayer typically has two years from the date of collection to file a claim for a refund.
Collecting Evidence
The first step a skilled tax attorney should perform when drafting a compelling penalty abatement request, is to gather evidence so that the offered explanation is consistent with the evidence. The attorney should obtain IRS transcripts, relevant taxpayer records, and explanations of what occurred from the taxpayer.
Conducting Legal Research
A taxpayer wins on the facts, but conquers with the law. The single most common reason the IRS grants penalty abatement requests is upon the taxpayer's showing that there was reasonable cause for failing to fully comply with their taxing obligations and not willful neglect. Therefore, the IRS looks to the specific facts and circumstances in each individual case to determine if the taxpayer's explanation demonstrates reasonable cause.
When conducting penalty abatement research an attorney should generally answer the following questions: (1) Is the penalty abatable due to reasonable cause? (2) What does reasonable cause mean for this specific penalty situation? (3) What grounds have already been held to constitute reasonable cause in similar penalty cases.
Drafting the Penalty Abatement Request
When drafting the penalty abatement request the attorney should divide the letter it into several sections. (1) An Introductory passage, (2) a facts section, (3) a law and analysis section, and (4) a conclusion.
In the facts section of the penalty abatement request, the author should ensure that the dates correspond to the events that are being presented to show that reasonable cause exists. In the law and analysis section the author must draw parallels between his client's circumstances and statutes, regulations, cases, procedures, rulings, and/or advice that is being cited to support his client's position.
For your benefit, our firm created a sample penalty abatement letter to help demonstrate what should be included in a strong request.
What can Teogatha Law do for you?
Teogatha Law will introduce your penalty case to the IRS in a manner designed to emphasize your position's strength, while diminishing any weaknesses. Through years of experience preparing penalty abatement requests, Teogatha Law knows which facts tend to persuade the IRS and what law should be cited. As your attorney, Teogatha Law represents you, shielding you from direct communication with IRS agents, which allows time for thoughtful responses to be presented through your attorney. For a free, no obligation consultation, fill in the form below.
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Disclaimer: Teogathalaw Law does not guarantee the accuracy of the material contained on this website, or webpage. None of the material presented on this website concerning tax matters may be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the taxing authorities.
