The IRS has the power to assess penalties in over 147 different situations. Almost every person or business suffering from an IRS problem owes the IRS even more money because of penalties. What you probably don't know is that the IRS writes-off approximately 50% of all penalties. The IRS calls the act of "writing-off" or eliminating a penalty an "abatement". The IRS does not normally volunteer any information about the likelihood to do this. You MUST ask!
Penalty amounts can be excessive. They increase daily and grow out-of-control quickly. In order to get rid of IRS penalties you have to convince the IRS that you have a good reason (excuse) for it to remove them.
The most common IRS penalties are for late filing or not paying. In order to qualify for an "abatement", all you have to do is establish a good reason that you did not file or did not pay.
Here are a few common reasons:
- My kids were sick.
- I was in the middle of a divorce.
- I moved.
- I lost my records in a fire/hurricane/flood.So, here are the basic steps for getting a penalty abated:
- I am an alcoholic.
- I got laid off.
- My mom was dying of cancer.
- I called the IRS and the person I talked to told me . . . .
The reality is that any reason is a good reason. Look at it this way . . . if you didn't file or pay on time or at all, chances are something was going on in your life at the time that caused to forget to file or not pay.
- Find out what penalties the IRS has assessed against you. You can find this out by reading your IRS transcript.
- Determine what reasons (excuses) you may have for not filing or not paying. (It is most helpful to compile a chronological list of the original due dates for each unfiled return and unpaid tax then to list reasons for not filing or not paying each one.)
- Write a letter. In your own words tell the IRS why it should consider abating your penalties. Gather documents and information to support your story.
- Make a copy of your letter and any additional documentation before mailing.
- Mail your letter to your local IRS taxpayer office or to the IRS Service Center for your area.
- Be patient and wait for a response. If you don't get one in about 60 days mail a copy of your original request along with a cover letter telling the IRS when you sent the original response and advise that you would like a response. Thank them in advance for their time.
- If the IRS rejects your abatement request, either send another letter asking for reconsideration or write and tell the IRS you want to appeal its decision.
- Do not give up. Often times you'll have more success with an appeal than with your first request letter. When writing your letter be as compassionate and real as you can . . . pretend you are trying to convince a friend or a family member of this same reason. It can save you a bundle of cash!