How to Write a Strong IRS Penalty Abatement Letter

Why the IRS Claims they Assert Penalties

The IRS officially states that the purpose of penalties is to foster a system of voluntary compliance with tax law, not to generate additional revenue for the government.  So, when drafting penalty abatement letters always place an emphasis on any steps taken to comply with the tax code and deliver persuasive explanations as to why an error or oversight may have occurred.

It is important to introduce a tax penalty case in a manner designed to allow the reviewing IRS agent to easily follow what happened, why a penalty was asserted, and what, if any, steps were taken to rectify or mitigate the problem(s). A strong penalty abatement letter should include legal citations that when used in conjunction with the facts, support the offered conclusion that the penalty should be abated or removed.  Once the most persuasive facts are selected, they should be presented within the appropriate legal framework so that the IRS will respond positively to the penalty abatement request.

Eight Required Steps for Drafting a Strong Penalty Abatement Request

1. The author should view the case with the same lens as the reviewing agent, so the first step is to obtain historical tax records, both from the taxpayer's personal papers and from the IRS.

2. Review the records to ensure that an accurate account of events is presented.

3. Cross reference your specific issue against case precedent, revenue rulings, chief counsel advice memorandum, and other sources, so that you can establish your main legal theory to demonstrate that penalty abatement is warranted.

4. To be a great advocate, you should also research arguments that the IRS may present against your theory, so that you can defend against those arguments before the IRS introduces them.

5. Draft the facts section of the penalty abatement request by incorporating the gathered evidence into a letter that explains what happened, why things went wrong, and what, if any steps were taken to rectify or mitigate the problems.

6. Draft the law section of the request by citing appropriate penalty abatement law and analyzing the facts to the law, by drawing parallels between your specific situation and the cited law

7. Review and edit the draft so that an errorless submission is sent to the IRS.

8. Mail the correspondence to the correct IRS service center.

What to Insert in a Penalty Abatement Letter

A penalty abatement letter should be divided into several sections.  There should be an introductory passage where the author introduces themselves; a fact section that explains what occurred and what went wrong; a law and analysis section where statutes and case law are presented and massaged into the facts; and lastly a conclusion section where the author expressly requests penalty and interest abatement.  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 offer you?

Teogatha Law can boost the power of your penalty abatement request and acutely improve your chances of success.   Through years of experience, knowledge, and education, Teogatha Law knows which facts tend to persuade the IRS and which statutes, cases, rulings, or procedures the IRS finds most compelling for a specific set of circumstances.  As your attorney, Teogatha Law represents you, so except in unusual cases you will not directly communicate with IRS agents.  This allows time for thoughtful statements to be developed and presented through your attorney. For a free, no obligation consultation, fill in the form below.