The IRS Tax Code provides numerous penalties that can be assessed against both individual and business filers. These tax filings can range from income tax, payroll tax, excise tax or informational returns. By being aware of the filing and depository requirements, you can reduce your risk of being assessed an IRS penalty. However, IRS penalty assessments do occur when returns are filed late or payments are not paid timely. There is now a formal IRS process that a taxpayer can use to request abatement of these penalties.
The IRS now has a first-time penalty abatement waiver program. If you meet the qualifications, the IRS will abate the failure to file, failure to pay, or failure to deposit penalties. To qualify, you had to have filed the return, or did file a timely extension for the requested tax return. In addition, you had to have paid, or arranged to pay with the IRS, through a formal installment payment agreement, all outstanding income, excise or payroll taxes, and had no prior tax penalties for the preceding three years. The assessment or payment of the under payment of estimated tax penalties are exempt from the 3 year look back rule. When you make a request to the IRS for an abatement of the assessed penalties, there a very good chance that the IRS will grant the abatement. However, the IRS will not abate interest charges on late payment of income or payroll taxes, only the penalties.
There are procedures for contacting the IRS about getting the assessed penalties removed. Taxpayers can contact the IRS directly, but trained professionals such as certified public accountants represent clients before the IRS on a regular basis, and know how to improve the likelihood of successful penalty abatement. Taxpayers need to sign an IRS Power of Attorney form so that their CPA can act on their behalf in dealing with the IRS.
Our firm is well positioned to help you obtain an abatement of IRS penalties. If you have any questions about abating IRS income or payroll tax penalties, please contact us.