What is a Civil Penalty Abatement?
Civil Penalty Abatements happen when the IRS makes the decision to reduce or remove tax penalties and interest. The IRS guideline for granting Civil Penalty Abatements state that the taxpayer must show reasonable cause for their request. The IRS defines reasonable cause as reasons that are outside of the taxpayer’s control. They recognize a variety of different circumstances for reasonable cause. Those circumstances include the following:
- Death, Serious Illness, or Unavoidable Absence
If you experienced the death of a spouse or a child, the IRS would consider this as reasonable cause for abatement. Additionally, if you or an immediate family member has a serious or chronic illness that requires you to care for them, the IRS will consider this as reasonable cause for abatement.
If you were not able to be at your residence through no fault of your own and that absence resulted in an inability to file your taxes, this is considered a valid reason for abatement as well. Examples of this could be an incarceration, a deployment into a combat zone, detainment in a foreign country, and other similar scenarios.
- Fire, Casualty, Natural Disaster, or Other Disturbance
If you live in a natural disaster area, the IRS will typically issue special instructions on how to request abatement. If you experience a fire or flood, or any other type of natural disaster, the IRS understands that finding a new residence might be more important than filing your taxes on time.
Because documentation can be destroyed when something like that occurs, the IRS considers all of the above as reasonable cause for abatement. Another disturbance that would qualify for reasonable cause is theft. Losing documentation would not be considered reasonable cause, as that is not a situation outside of your control.
If you are unable to obtain tax documentation, such as a W2 or 1099, the IRS will consider this as reasonable cause for abatement.
Let’s say you file your taxes and then realize you made an error. What can you do? If you make an attempt to correct your error after filing and end up with penalties and interest as a result, this is a reasonable cause for abatement that the IRS will evaluate.
Whereas erroneous advisement from a CPA, accountant, bookkeeper or other third party does not qualify for abatement, erroneous advice from the IRS, either over the phone or in writing, does qualify as reasonable cause for an abatement. Don’t throw away the IRS correspondence sent to you – if there was an error in the advice you were sent, you might need to submit it with your abatement request.
If you were ignorant of a tax law or tax filing requirement, there was a tax law change that you were unaware of, or if you could not reasonably be expected to know about a tax law or filing requirement, the IRS will consider this as reasonable cause for abatement.
If paying your taxes might cause serious financial hardship for you, this would qualify as reasonable cause for an abatement. The IRS may consider bankruptcy as reasonable cause as well.
When submitting your abatement request, it is important that it is done correctly. Seeking the advice of a qualified tax attorney who has experience in civil penalty abatements would be an excellent choice. Contact www.taxlawtampa.com today and let our expertise work for you.