February 27, 2020

Penalty Abatement

Penalties on IRS debt are probably the most unpopular elements of IRS collection activities. Penalties for late filing, penalties for inaccurate filing, penalties for failure to file, interest on unpaid balances, and interest on penalites can cause your total balance due to the IRS to double or triple in a very short period of time.

As noted before, you can often help yourself by filing and paying what you can as soon as you can simply to stop the running of penalties. Often, it makes sense to designate on your payment, how that payment is to be applied so as to reduce penalties. In addition, you should be aware that some IRS debts can become stale and uncollectable because of the statute of limitations – if you have not filed returns, however the statute of limitations does not even start to run.

Although not well known, the IRS will consider proposals to reduce or eliminate penalties if you can show “reasonable cause.” Reasonable cause is determined on a case by case basis, but an overriding factor relates to whether you acted in good faith and made a genuine effort to pay your tax obligation.

There is no particular form or format for a penalty reduction request. The questions I will ask you to formulate an argument include:

– what happened and when did it happen?

– what facts and circumstances gave rise to the penalty, i.e., what prevented you from filing your return, paying your tax or otherwise complying with the law?

– how did these facts and circumstances prevent you from complying with the law?

– how did you handle your other financial affairs during this time?

– what efforts did you make to comply?

– do you have any penalties in the past two years?

– were there circumstances beyond your control?

– are there facts about your background or education that would explain why you did not file certain documents or pay certain obligations?

– were there recent changes in the tax law?

– was the tax issue complex?

Many times, we can combine a penalty abatement request with either an installment agreement or Offer in Compromise. Generally, however, we will wait until the underlying tax portion has been paid before requesting a reduction of penalties.


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Jonathan Ginsberg

Attorney at Ginsberg Law Offices
Attorney Jonathan Ginsberg helps taxpayers work out negotiated settlements of tax debt with the IRS and Georgia Department of Revenue.

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