By Taxpayers who make an effort to comply with the law but are unable to meet their tax obligations due to circumstances beyond their control may qualify for relief from penalties.
If you’ve received a notice stating that the IRS assessed a penalty, the first step taxpayers should take is to check that the information in the notice is correct. Those who can resolve an issue in their notice may get relief from certain penalties, which include failing to:
- File a tax return
- Pay on time
- Deposit certain taxes as required
There are several types of penalty relief:
1. Reasonable cause
This relief is based on all the facts and circumstances in a taxpayer’s situation. The IRS will consider this relief when the taxpayer can show they tried to meet their obligations but were unable to do so. Situations, when this could happen, include a house fire, natural disaster and a death in the immediate family.
2. Administrative Waiver and First Time Penalty Abatement
A taxpayer may qualify for relief from certain penalties if he or she:
- Didn’t previously have to file a return or had no penalties for the three tax years prior to the tax year in which the IRS assessed a penalty.
- Filed all currently required returns or filed an extension of time to file.
- Paid, or arranged to pay, any tax due.
3. Statutory Exception
In certain situations, legislation may provide an exception to a penalty. Taxpayers who received incorrect written advice from the IRS may qualify for a statutory exception.
Taxpayers who received a notice or letter saying the IRS didn’t grant the request for penalty relief may appeal. If you have any questions about IRS penalties, please call.