According to the IRS Mission Statement, penalties are assessed against a taxpayer to “Promote Voluntary Compliance”. The major problem with this statement is if you are charged with all the penalties authorized by the Internal Revenue Code, most individuals and businesses will never pay off the balances they owe the IRS. The failure to pay penalty continues to accrue on your account until the maximum penalty is reached, your account is paid in full, you settle with the IRS, the Statue for Collection expires or you file bankruptcy.
The three most common penalties associated with income tax returns are failure to file (maximum 25%), failure to pay (maximum 25%) and the estimate penalty. Businesses can also be charged a failure to deposit penalty (maximum 15%) for failing to deposit payroll taxes.
There are more than one hundred and forty different penalties the IRS can assess against a taxpayer in varying situations. It is virtually impossible to list each one here. However, one thing you should remember, almost all penalties can be abated (removed) based on “reasonable cause” and IRS errors, which are more common than you might think.
Reasonable cause is defined by the IRS as “any reason which establishes that the taxpayer exercised ordinary business care and prudence but nevertheless was unable to comply with a prescribed duty within the prescribed time ”. This may seem to be a fairly simple condition to meet. You didn’t have the money so you couldn’t pay the IRS. Lack of money to pay, in most cases is not considered by the IRS to beReasonable Cause. However, in some cases, depending on the circumstances, lack of money to pay will be allowed by the IRS as Reasonable Cause.
The key to a successful request for Abatement of Penalties is the way it is presented to the IRS and documentation.
Our Associates are experts in determining, presenting and documenting Reasonable Cause for abatements of all penalties assessed by the IRS. Our clients are queried by the Associate assigned their case to determine if they qualify for abatement of one or all penalties based on Reasonable Cause or IRS errors. The client will be told on the front end what the chances are of abatement of penalties. No one can promise you before investigating that they can guarantee any penalties will be abated.