Does the IRS forgive?

The Internal Revenue Service takes its job very seriously, and dealing with them can be a very long and tedious process.  Although their communications are direct and stern, not every tax bill, penalty, or debt is completely final and beyond negotiation.  Penalty Abatement is the process by which a taxpayer can apply to the IRS to have penalties removed.  Like everything with the IRS, there are strict guidelines for qualifying, and in most cases, the taxpayer will need to prove reasonable cause for the late filing or payment that incurred the penalties.

A reasonable cause is any legitimate excuse that is out of a taxpayer’s control coupled with proof that filing was attempted but proven to be impossible because of the circumstance. Possible reasonable causes include:

• Natural Disasters
• Death of a family member
• Medical emergencies
• Unavoidable absence, such as: being in rehab, in jail, or held hostage in another country
• Destruction of records due to fires, floods, or other casualties
• IRS made a mistake or delayed a return. 
• Given bad advice by the IRS that leads to penalties, if this advice is in writing
• Unable to determine the amount of tax for reasons beyond one's control
• Received incorrect advice from a tax professional who is considered competent and trustworthy

The IRS also provides a First Time Penalty Abatement (FTA) more liberally for first-time offenders who have filed and paid on time for at least three years.  If these conditions are met and there is reasonable cause, the IRS will generally grant an FTA waiver to relieve taxpayers from failure-to-file, failure-to-pay, and failure-to-deposit penalties. 

Although a taxpayer can apply for penalty abatement without professional help, it is prudent to enlist the service of a trusted tax professional to make sure all information is correct and true.