The IRS routinely sends penalty notices for dozens of reasons, including missed deadlines and errors in your filings. Receiving one or more of the possible IRS penalties can be overwhelming, if not stressful. Fortunately, an IRS penalty notice does not necessarily mean the agency has made a final decision about your tax situation. You can apply for relief through penalty abatement.
What Are the IRS Penalty Relief Options?
The following are IRS penalty relief options:
IRS Penalty Abatement (First-Time Penalty Abatement)
The IRS offers a unique category of penalty relief for first-time offenders, commonly referred to as first-time penalty abatement. You are eligible for first-time penalty abatement relief if you meet the following criteria:
- You previously did not have to file a tax return or do not have a record of penalties for the previous three years prior to the year you received a penalty.
- You have paid or have established a payment plan for taxes you owe the IRS.
- You are up to date in filing required tax returns or have filed an extension.
IRS Reasonable Cause Penalty Relief
The IRS considers a reasonable cause penalty relief in situations where the taxpayer went through a tough or challenging year due to circumstances beyond their control. You may qualify for reasonable cause relief if the following situation applies to your or your family:
- You were affected by catastrophes such as fire, casualty, natural disaster, or other disasters beyond your control.
- You tried to obtain tax records but were not able to get them no matter your efforts.
- You or an immediate family member were absent due to severe sickness, incapacitation, or death.
When requesting reasonable cause penalty relief, you will need to provide supporting documents. Documents can include hospital or court records, a doctor’s statement, certification of natural disasters, and more.
IRS Statutory Exception Penalty Relief
If you have received penalties because the IRS made errors, you should not be responsible for paying them. In such a scenario, you must apply for statutory exception penalty relief for the IRS to remove the penalties. When applying for the statutory exception penalty relief, you should attach the following:
- The original written request you wrote to IRS seeking advice.
- The incorrect written advice the IRS provided you and which you followed.
- Any other supporting documentation that connects the bad advice from IRS to the penalty you received.
What Is Form 843?
Form 843, or Claim for Refund and Request for Abatement, is the IRS document that a taxpayer uses to claim a refund or request an abatement of some specific taxes, penalties, interest, fees, and additions to taxes.
What Information Do You Need to File Form 843?
Form 843 requires the following basic information:
- Taxpayer’s name, address, and social security number (SSN)
- Dates of the tax period related to the abatement request
- Spouse’s SSN (when applicable)
- Type of tax return that you filed
- Employer Identification Number (EIN) if your request is related to your business
- Type of tax, penalty, interest, or fee you are requesting the IRS to abate
Do You Need to File More than One Form 843 If You Have Multiple IRS Penalty Notices?
Once you are sure you are eligible for one of the three relief options, complete Form 843 and submit your IRS penalty abatement form as soon as possible. Use separate Form 843 forms if you have multiple penalty notices from the IRS.
What Is the Deadline to File Form 843 With the IRS?
You must submit your request for abatement as soon as possible. The IRS requires that you file Form 843 within three years of filing your tax return or within two years of when you paid your taxes. Do not forget to attach relevant documentation supporting your claims.
Can You Appeal a Penalty Abatement Decision from the IRS If You Are Denied?
If the IRS denies your request for penalty abatement the first time, you can use the IRS penalty appeal process to request a review. The IRS offers a convenient online Penalty Appeal tool to appeal your penalty abatement denial. If you are considering a penalty abatement appeal, keep in mind you have only 30 days from the date you received the denial from the IRS to do so.
Finally, if you need further information about penalty abatement or do not qualify for penalty abatement and need help to resolve your tax issues, get started with our free online evaluation to see how we can help.
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