Penalties incurred from filing taxes late or failing to pay taxes on time are not only frustrating but costly for many U.S. taxpayers. The IRS will sometimes agree to an abatement of these tax penalties, but most people are unaware of this provision.

Qualifying for Tax Penalty Abatement

To qualify for penalty abatement, a taxpayer has to meet certain criteria and offer an acceptable reason for failing to pay their taxes or paying their taxes late. The taxpayer must submit evidence to support their claim and convince the IRS that their situation qualifies in order to benefit from this provision. The reasons for penalty abatement according to current IRS guidelines include:

• • Reliance on a tax professional
  • Ignorance of tax law
  • Medical illness (personal or a family member)
  • Natural disasters
  • Significant financial hardship
  • Death in the family

First-Time IRS Tax Penalty Abatement

First-time non-compliant taxpayers can request penalty abatement (FTA). This request applies to certain kinds of penalties in a single tax period but could end up saving  taxpayers considerable money in penalty fees. Individuals can request a FTA for failure to file or failure to pay penalties and businesses can also request it for failing to file payroll taxes. Of course, the IRS does not forgive these penalties easily. In order to qualify, the taxpayer must file their late taxes or have filed a valid extension. They also must have a three-year clean penalty history. If the IRS concludes that the taxpayer has demonstrated payment compliance, they may accept the request and abate the penalties.

How Do I File for Penalty Abatement?

Before filing for penalty abatement you’ll need to be sure you qualify and are able to communicate a convincing argument to the IRS. For assistance, turn to Madison Fund Services, Ltd.  We understand what types of situations will qualify a taxpayer for penalty abatement and can help you file the necessary paperwork. To learn more or discuss your circumstances, contact us at 718-829-0134 or request a consultation through our website.