Tax Penalty Removal

Tax penalty removal: Understanding Abatement

Tax Penalty Removal
Tax Penalty Removal

When faced with tax penalties, many people think that the dreaded IRS letter stating how much you owe is the final say. The perception of the IRS is that every situation is absolute and that the numbers of the tax notice are incontrovertible.

Most people are not aware that according to the IRS Internal Revenue Manual, a taxpayer may be granted “reasonable cause relief” if the individual was not able to comply with their tax obligations due to a circumstance beyond their control.

What does this mean? The IRS has a process through which a taxpayer may request tax relief based on the individual’s situation. This process could result in the removal of tax penalties and/or lower interest rates on balances owed at the discretion of the IRS. Though it may sound too good to be true, the IRS does practice tax penalty removal for qualified individuals. Understanding what abatement is and how to request it can save you a significant amount of money when a tax bill rears its ugly head.

What is abatement?

An IRS tax penalty abatement is when the IRS makes the decision to remove or reduce previously assessed interest, penalties or fees. Abatements are processed on a case-by-case basis and will be judged based on how your situation created a hardship that warrants the reduction or removal of certain penalties, interest, and fees assessed.

What Types of Circumstances Qualify for Abatement?

Death, Serious Illness, or Unavoidable Absence

Several things can fall into this category. If you lost a spouse or a child or if you, your spouse or your child encountered a serious illness, you could qualify for abatement. Understand that this is not limited to physical illness – situations such as entering a rehabilitation program could qualify for abatement as well. Physical and mental impairment are also considered. An unavoidable absence could be something such as an incarceration. These, among other things, can be considered by the IRS for tax penalty removal.

Fire, Casualty, Natural Disaster, or Other Disturbance

If there was a significant natural disaster, fire, or some other catastrophic occurrence that made it impossible to pay your taxes on time, the IRS would consider that. Anyone would understand that if your house burns down or floods, finding somewhere to live is more important than a tax bill. The IRS understands that too.

Missing paperwork

If you’re unable to get all of the records to file your taxes accurately, you can request abatement for that reason. Didn’t get a 1099 or a W2 and later received a notice of adjusted taxable income and additional taxes? The IRS will take this into consideration when requesting abatement.

You made a mistake

If you file your taxes and then realize you made a mistake, you can request and abatement on those grounds, as long as you make an attempt to correct the mistake.

Erroneous Advisement

If you received oral or written advice from the IRS that was wrong and resulted in a tax penalty, the IRS will consider this for abatement. Please note, this does not cover advice from a CPA, accountant, bookkeeper or another third party.

Ignorance of the Law

If you had a recent change of circumstances and something became taxable income without you being aware of the newly taxable income, such as a pension payment after the death of a spouse, the IRS will consider this for abatement.


If you have a personal situation that would cause significant financial hardship to you if you paid your taxes, this could be a reason for abatement. A bankruptcy? The IRS will consider it.

How to Request Abatement

To request abatement, follow these steps:

  • Write a letter to the IRS and include
    • Your name
    • Social security number
    • The tax year(s) you’re requesting abatement for
    • Tax form

You can use an IRS form 843 to request abatement, but one form will count for one year. In writing a letter, you can request abatement for multiple tax years. In the letter, make sure you use the word “abatement” in the letter.

  • Mail your letter or forms to the IRS at the address listed on your federal tax return and put it to the attention of the Penalty Abatement Coordinator.
  • Await a response from the IRS. They will respond by mail with an approval or denial.

If you need assistance with abatement, would be glad to advise you on this and any other tax issue that you may have. Contact them today and let their expertise work for you.