Friday, June 19, 2009

IRS Penalty Abatement

This is what everyone wants when they incur a penalty from the IRS. Sometimes the IRS will grant it, sometimes they won’t. One of the more common penalties is the failure to file penalty. The IRS will assess this penalty against a taxpayer if the taxpayer has not filed their return by the due date or if the taxpayer as not filed an extension by the due date. Getting penalties abated is no easy task. The IRS doesn’t simply remove penalties by someone asking them kindly or by using highly technical language. The IRS will consider penalty abatement only if there is a rock solid reason why they should not charge the penalty.

This is the first step in having a failure to file penalty abated. There has to be some reason the taxpayer did not file their return by the due date. Feeling sick, working too many hours, did not understand the tax changes for the current year and so forth and so on are not reasons the IRS would consider in abating penalties. Generally the event that prevented a taxpayer from filing must be catastrophic in nature such as a severe medical illness, an act of God such as a hurricane, earthquake, fire or landslide or something of the sort. Whatever the event is it must be thoroughly documented and submitted to the IRS. Then and only then will the IRS consider removing the failure to file penalty.

In a prior blog I mentioned the devastating effect of allowing penalties to accumulate. This is something not to be taken lightly. This has the power to cause tremendous financial problems for taxpayers. If you have questions regarding penalty abatement you should consult with a tax professional who can advise you properly.

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