Civil Penalty Abatements

Civil Penalty Abatements: Understanding What They Are

Civil Penalty Abatements
Civil Penalty Abatements

When you file back taxes, the last thing that you need in addition to a tax bill is the penalties and accruing interest that are attached to a back tax filing. Penalties and interest with the IRS can be steep: your tax bill could potentially double in three years’ time.

The IRS does this to motivate people to get into compliance with them. As harsh as these penalties might seem, the IRS does understand that back tax filings are not always the result of someone just not wanting to file their taxes. They understand that things can happen that impede a person’s ability to file in a timely manner.

Because of this, if you have reasonable cause, the IRS can reduce or remove penalties and interest from your tax debt. The IRS receives millions of requests for civil penalty abatements every tax year. Knowing what they are and the proper way to process one is the first step in getting some relief from penalties and interest charges from the IRS.

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.

  • Missing paperwork

If you are unable to obtain tax documentation, such as a W2 or 1099, the IRS will consider this as reasonable cause for abatement.

  • You made a mistake

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.

  • Erroneous Advisement

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.

  • Ignorance of the Law

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.

  • Hardship

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 today and let our expertise work for you.