Sample IRS Penalty Abatement Request Letter

Introduction of the Penalty Abatement Letter

The first part of a persuasive penalty abatement letter should be an introduction section.  This is where an author introduces themselves and informs the reader why they are writing.  By opening the letter with a request for penalty abatement, an IRS agent is easily able to follow the letter while holding the author's goal in mind.

Example Introduction Section
Please be advised that Teogatha Law represents the referenced taxpayer and that we are writing to request that the accuracy related penalty, together with interest, are abated for the taxpayer's 20xx tax year.  A discussion of the underlying facts, supportive law and analysis, and the basis for Teogatha Law's conclusion appears below.

IRS Penalty Abatement Letter -- Fact Section

The second part of the IRS penalty abatement letter should be a facts section.  The facts section is where a taxpayer can win or lose their penalty abatement request.  So, in order to be effective, the author should spend time gathering relevant evidence so that the pertinent facts can be flushed out and massaged directly into penalty abatement law.   The devil is in the detail, so  be candid when writing the facts section and be sure to explain what went wrong and what, if any, steps were taken to rectify or mitigate any problems.

Partial Example Facts Section
A partnership has three partners with diverse engineering backgrounds, so they each contribute in different ways to the partnership.  The partnership's mission is to develop an internet website that is going to be the next sensation.

The day after the partnership commenced operations costs began to soar and budgeted expectations were quickly exceeded.  None of the partners came to the partnership with substantial savings, so the partnership was compelled to use their resources more efficiently and self prepare their tax return.  The partner with the most tax experience began reading IRS publications, notices, and instructions.  This partner spent as much time as he needed to fully understand the law.

Believing that he had a firm grasp on partnership taxation, the partner prepared and filed the partnership's tax return.  As it turns out, taxation is more complicated than the partner thought.  After all, Albert Einstein said "[t]he hardest thing in the world to understand is the income tax."

Immediately after receiving notice of a compliance error, the partnership reviewed the matter and the partners promptly paid the additional $xx,000 in taxes.  A month later, the partnership received a letter from the IRS stating that they owe an additional $y,000 in penalties.

IRS Penalty Abatement Letter -- Issue Section

The issue section is optional, and is generally only used when the situation is complex.  If writing an issue section, an author should not state the issue as a problem, but rather pose a questions that asks to make things right. For example:

Example Issue Question
Should a taxpayer be assessed a penalty when they made a diligent and reasonable effort to learn the law, but nonetheless made an honest mistake and misunderstood a complex tax rule?

IRS Penalty Abatement Letter -- Law and Analysis Section

The law and analysis section is where we provide the IRS with the law that the taxpayer is relying upon to support penalty relief and synthesis its application to the taxpayer's unique situation.  Here are a few guides that are designed to explain some penalty issues: 

Partial Example Law and Analysis Section
In the tax case Bouvelt Realty v. Commissioner, the court held that reasonable cause existed in a situation where responsible corporate officers had taken every safeguard for meeting corporate tax obligations, yet still inadvertently made untimely deposits. The court stressed the “grave necessity” of meeting tax obligations in a timely manner, while noting that imposing penalties is not mandatory by statute. Lastly, in evaluating the facts present in Bouvelt, the court stressed that the taxpayer had a history of compliance and that upon notification of the failure, the taxpayer immediately took steps to rectify the failure.

IRS Penalty Abatement Letter -- Conclusion

The final section is where the author concludes by respectfully requesting that the IRS abate the penalties and interest associated with those penalties.

What can Teogatha Law do for you?

Teogatha Law can maximize your chances of successfully abating IRS penalties.  Through years of study and practice, Teogatha Law has achieved a respected level of expertise in penalty abatement matters.  When you become our client, we work with you in achieving the goal of penalty relief.