When federal tax obligations are not met, whether by accident or intention, hefty fees and/or penalties may occur. The good news is the IRS will take into consideration an array of reasonable causes for failure to file a tax return or late payments. If an individual or a business can establish a reasonable cause, it may be wise to request a penalty abatement from the IRS. The IRS will consider waiving penalties and/or fees for various sound reasons.
Ways to request penalty relief
When a taxpayer has compiled facts and reasonable causes for tax penalty relief, they can apply for abatement by:
- A written petition
- A verbal request
- IRS Form 843
Reasonable causes for penalty relief
- Death – Death of a family member or close friend is a reasonable cause that can being reviewed during an abatement request. If the taxpayer or an immediate family member of the taxpayer is dealing with a serious illness, this will also be taken into consideration.
- Incorrect advice – If a tax professional gave the taxpayer incorrect advice, which resulted in an error or tax payment failure, this will be considered. If the taxpayer believed this person to be capable, and were misled, this is also a fair reason.
- Unavoidable absence – An unavoidable absence can include jail time, rehab, serious illness, natural disaster, or a variety of other factors outside of the taxpayer’s control.
- Uncertainty on the amount – The reason for being uncertain on the amount of tax owed must be proved as beyond your control. This can include misinformation from a tax professional or another factor.
- Hostage situation –While an extreme scenario, being held hostage in another country is a reasonable cause the IRS will recognize.
- Destruction of records – Records may have been destroyed for various factors outside of the taxpayer’s control, such as a fire, flood or other natural disaster. An inability to obtain records is a means for penalty relief.
- Civil disturbance – Another severe situation, a mail strike or a riot may have obstructed the taxpayer from making a payment or deposit.
A lack of funds is not considered a reasonable cause, but failure-to-pay penalties may still be waived if the lack of funds relates to a reasonable cause listed above. If you would like to learn more about penalty relief, visiting the IRS website will supply more information about facts that establish reasonable cause.