What Are Reasonable Causes For the IRS Penalty Abatement
- January 14, 2020
- Posted by: asal
- Category: Tax Relief
If you’re struggling to pay back taxes, and penalties are rising, you may get tax relief with penalty abatement. When you are late in paying or filing taxes, the IRS notices this. Whether it’s a late-filed return, late payment, or unpaid balance, you face penalties. If you aren’t making payments on your taxes, the penalties can add up quickly. However, IRS penalty abatement can help those struggling to pay down taxes because of penalties. There are several situations wherein a taxpayer can qualify for IRS penalty abatement. One solution is called reasonable cause penalty abatement. While many do receive the benefits of IRS penalty abatement, not everyone will. Working with a tax resolution services firm can better your chances of receiving a favorable outcome when dealing with the IRS. If you are hoping for abatement of IRS penalties, call the experts at Platinum Tax Defenders.
What is Penalty Relief Due to Reasonable Cause?
According to the IRS website, “reasonable cause is based on all the facts and circumstances in your situation.” The IRS states that it considers any reason that “establishes that you used all ordinary business care and prudence to meet your federal tax obligations.” The IRS will consider any sound reason for a taxpayer:
- Failing to file a tax return
- Make a deposit
- Pay tax when due
What Does the IRS mean by Ordinary Business Care and Prudence?
The IRS will always assess if taxpayers exercised ordinary business care and prudence in making sure taxes are filed and paid on time. What this means is the IRS will check to see if the taxpayer knew the event or circumstance was going to occur. Next, the IRS will analyze if the taxpayer took necessary states to avoid being late. If the IRS determines you did not practice ordinary business care and prudence, they can deny your penalty abatement request.
What are Reasons the IRS Considers to Offer Penalty Abatement?
Below are a few situations in which the IRS will likely offer tax penalty relief:
- Fire, casualty, natural disaster or other disturbances
- Inability to obtain records
- Death, serious illness, incapacitation, or unavoidable absence of the taxpayer or a member of their family.
- The IRS will consider any other reason that establishes you used ordinary and business care and prudence to meet your Federal tax obligations but were unable to.
Is Lack of Money a Reasonable Cause for IRS Penalty Abatement?
The IRS does not consider a taxpayer’s lack of money as a reasonable cause for failure to file or pay on time. However, the IRS may consider this reason to meet reasonable cause standards for the failure-to-pay penalty.
What Criteria does the IRS Use When Establishing Reasonable Cause for Penalty Abatement?
There are specific facts the IRS needs to determine a reasonable cause for abatement of penalties. A tax relief expert can help you determine if any of the below criteria apply to your specific case:
- What happened and when
- Facts and circumstances that prevented you from filing your return. Also, the IRS looks at what prevented you from paying taxes during the period that you did not file or pay on time.
- How your situation affects your ability to file and/or pay taxes.
For corporations, estates, or trusts, the IRS looks at whether the affected person or family member has the sole authority to execute the return or pay.
Penalty Abatement for Death, Illness or Unavoidable Absence
Several of the most apparent reasons warranting penalty abatement are death, severe illness, or unavoidable absence. The reasons mentioned above apply to both the taxpayer or a taxpayer’s immediate family member.
Who Qualifies as an Immediate Family Member for Taxes?
The IRS considers immediate family members to be a taxpayer’s:
Corporations also may receive the IRS penalty abatement for the reasons outlined above. If a taxpayer has sole authority over the tax dealings of a corporation, and something happens to them, the company could qualify for penalty abatement. The reasons for corporations to be eligible for penalty abatement are:
– A taxpayer who has the sole authority or a member of their immediate family suffers death, severe illness, or unavoidable absence.
Additionally, if more than one person handles taxes for the company, the IRS may still consider abatement of penalties. However, the IRS will look into why the other person left in charge did not handle filing or paying taxes on time.
When dealing with penalty abatement requests for a corporation, a tax resolution expert can be a huge help. Tax relief firms often employ tax attorneys, who are very familiar with tax law and penalty abatement for companies.
How do I Apply for Penalty Abatement for Death, Serious Illness, or Unavoidable Absence?
There are several items that you must include in your penalty abatement request. When submitting documents to the IRS for an application for penalty abatement, it’s best to seek out the help of an experienced tax relief firm.
Here’s the information you’ll have to send to the IRS when requesting a penalty abatement for death, serious illness, or unavoidable absence.
- Date of the date
- The dates, duration, and severity of the illness
- Dates and reason for absence
- How did the event prevent you from filing the return, making payments, or paying the total balance due?
- Did you return to promptly filing your returns, making deposits, or paying the balance once the illness passed? Also, did you return to keeping up with your taxes after your unavoidable absence? The IRS will also look at whether you returned to routine tax filing after the passing of your family member.
- What the relationship was like you had with that family member.
- Were any other business obligations affected?
IRS Penalty Abatement for Fire, Casualty or Natural Disaster
So The IRS might grant you penalty abatement if you were affected by a natural disaster. The IRS states that a natural disaster is that which is subsequently determined by the President to warrant Federal Government assistance.
The IRS determines you are an “affected person” in the natural disaster if:
- Your business or residence is in the disaster area
- Taxpayer’s tax records for person or business are in a disaster area
- Your spouse is located within the disaster area while filing a joint return
- The taxpayer is a relief worker who is assisting a disaster area
Penalty Abatement for Fire, Casualty and Other Disturbances
There are also penalty abatement opportunities for taxpayers not affected by natural disasters. If you were late on taxes due to a fire, casualty, or other disturbance, the IRS might grant you a penalty abatement. These are the items you’ll need to provide the IRS to prove you warrant a penalty abatement.
- Timing in which the incident happened
- How the circumstance affected you or your business
- What steps you took to comply with filing or paying taxes on time
- After the situation occurred, did you begin complying with taxes once you were able to do so
Penalty Abatement for Being Unable to Obtain Records
The IRS may grant you penalty abatement if you can show you could not obtain your records. As mentioned, the IRS may say you establish a reasonable cause if you utilized ordinary business care and prudence when attempting to comply with taxes. Below is what you will need to submit to the IRS for this type of request:
- Why were these records necessary for you to fulfill tax obligations?
- What steps did you take to get the records, and why were they unavailable?
- When did you become aware you may not be able to access these records?
- Why didn’t you try to estimate the information?
- Did you contact the IRS to ask about what to do?
- Once you received the missing information, did you comply?
Need Help Filing for Penalty Abatement? Call Platinum Tax Defenders
Platinum Tax Defenders has successfully helped thousands of taxpayers and businesses get some or all of their penalties absolved. Don’t go into an IRS penalty abatement conversation without a tax resolution professional by your side. Call Platinum Tax Defenders today for a free consultation at 866-866-8053, or visit www.platinumtaxdefenders.com for more information.