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IRS Penalty First-Time Abatement: What to Know – NerdWallet

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IRS Penalty First-Time Abatement: What to Know - NerdWallet 1

The IRS assesses billions in tax penalties every year — in 2017, particular person taxpayers confronted a share of greater than $11 billion in penalties — however few folks know the company is usually prepared to change its thoughts and reverse sure tax penalties for first-time offenders. Two tax execs provide some insights into how the IRS’ penalty-abatement program works and the way you could find a way to get out of a tax penalty — and even get a refund for one you already paid.
See when you qualify
In case you meet three standards, you would possibly find a way to get the IRS to reverse course on its penalties for not submitting a tax return or for not paying on time. First, you will have to be present on submitting your tax returns (it’s OK to have a tax extension). Second, you will have to be present in your tax invoice or at the very least have a cost association in place with the IRS. Third, you will need to have a clear file: no penalties for the three tax years earlier than the tax 12 months wherein you obtained a penalty.
“Basically, if you have been in compliance, and you filed on time and you haven’t had any penalties in a three-year period, you’re allowed to make a mistake,” says John Lyons, a licensed public accountant within the tax division at accounting agency Gorfine Schiller Gardyn in Maryland.
Ask for first-time penalty abatement
You possibly can ask for first-time penalty abatement by calling or writing to the IRS, Lyons says. In case you go the cellphone route, you would possibly get a solution instantly, however make sure to get the agent’s title and quantity after which comply with up with a written letter, he notes.
And don’t fear about haggling. “It’s not a negotiation, it’s all or nothing. You either qualify or you don’t qualify,” says Jim Buttonow, a licensed public accountant in Summerfield, North Carolina.
Penalty abatement often received’t get you aid from curiosity the IRS might have additionally tacked on to your steadiness, Buttonow warns. “However, if there’s interest that accrues from the failure-to-pay penalty or the failure-to-file penalty that’s owed, the associated interest will get abated also,” he says.
Fill out IRS Type 843
In case you’ve already paid a penalty and now notice you would possibly find a way to get your a reimbursement, you’ll need to get your palms on IRS Type 843 , Lyons says. There, you’ll inform the IRS which penalty you need refunded and why. Usually the IRS permits folks to return two or three years, relying on the circumstances, however typically it may be longer, in accordance to Buttonow.
Be persistent
If the IRS denies your request for first-time penalty abatement however you continue to suppose you qualify, you possibly can enchantment the choice. In case you don’t qualify for first-time penalty abatement, you may want to ask for penalty aid “due to reasonable cause,” Lyons notes. However when you incurred a tax penalty merely since you didn’t know the foundations or made a mistake, that route most likely isn’t for you — penalty aid due to affordable trigger is often solely viable for individuals who have skilled deaths within the household, home fires, medical trauma, pure disasters or different dire conditions. You’ll want to present documentation equivalent to hospital information, court docket statements or different proof that helps your declare.
Know when to get assist
You’re not required to rent somebody to request a primary-time penalty abatement for you. In case you’re undecided whether or not you’ve paid any penalties or don’t understand how a lot you owe, you don’t have to pay somebody to get that both: You will get your account data from the IRS at no cost by requesting a transcript. Nevertheless it’s OK to get assist from a tax professional. “Unless you speak IRS, it’s really difficult to understand this,” Buttonow says.
Both manner, difficult a primary-time penalty may have its personal rewards. “It always is worth pursuing,” he says. “If you don’t ask for it, you don’t get it.”

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